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0 / 25
A New Identification Of Fiscal Shocks
Based On The Information Flow
Giovanni Ricco
London Business School
ESSIM 2015
Tarragona – 26th May 2015
/ 25
Before
The Obama administration’s plan to reduce the number of
U.S. troops in Iraq and Afghanistan will cut the
Pentagon’s war budget by $42 billion - a 26 percent
decrease from this year’s level, according to government
officials. [Bloomberg News, 21 Jan 2011]
Upon
Lawmakers voted last night by wide margins to pass
legislation ending the shutdown. Obama signed the bill
just after midnight.The measure suspends the debt limit,
puts government workers back on the job starting today
and permits the U.S. to pay its debts, benefits and
salaries. [Bloomberg News, 17 Oct 2013]
After
The Information Flow on Fiscal Spending
The economy in the U.S. expanded more than forecast in
the third quarter, capping its strongest six months in
more than a decade, as gains in government spending and
a shrinking trade deficit made up for a slowdown in
household purchases. [Bloomberg News, 30 Oct 2014]
1 / 25
Before
The Obama administration’s plan to reduce the number of
U.S. troops in Iraq and Afghanistan will cut the
Pentagon’s war budget by $42 billion - a 26 percent
decrease from this year’s level, according to government
officials. [Bloomberg News, 21 Jan 2011]
Upon
Lawmakers voted last night by wide margins to pass
legislation ending the shutdown. Obama signed the bill
just after midnight.The measure suspends the debt limit,
puts government workers back on the job starting today
and permits the U.S. to pay its debts, benefits and
salaries. [Bloomberg News, 17 Oct 2013]
After
The Information Flow on Fiscal Spending
The economy in the U.S. expanded more than forecast in
the third quarter, capping its strongest six months in
more than a decade, as gains in government spending and
a shrinking trade deficit made up for a slowdown in
household purchases. [Bloomberg News, 30 Oct 2014]
1 / 25
Before
The Obama administration’s plan to reduce the number of
U.S. troops in Iraq and Afghanistan will cut the
Pentagon’s war budget by $42 billion - a 26 percent
decrease from this year’s level, according to government
officials. [Bloomberg News, 21 Jan 2011]
Upon
Lawmakers voted last night by wide margins to pass
legislation ending the shutdown. Obama signed the bill
just after midnight.The measure suspends the debt limit,
puts government workers back on the job starting today
and permits the U.S. to pay its debts, benefits and
salaries. [Bloomberg News, 17 Oct 2013]
After
The Information Flow on Fiscal Spending
The economy in the U.S. expanded more than forecast in
the third quarter, capping its strongest six months in
more than a decade, as gains in government spending and
a shrinking trade deficit made up for a slowdown in
household purchases. [Bloomberg News, 30 Oct 2014]
1 / 25
A New Identification
Based on the Information Flow
Identification of fiscal spending shocks:
I
Imperfect information & fiscal foresight
I
New measures of the information flow: before, upon and after
Three orthogonal shocks :
I
2 / 25
A New Identification
Based on the Information Flow
Identification of fiscal spending shocks:
I
Imperfect information & fiscal foresight
I
New measures of the information flow: before, upon and after
Three orthogonal shocks :
I
1. Expected Fiscal Changes
agents forecast before their realisation
2 / 25
A New Identification
Based on the Information Flow
Identification of fiscal spending shocks:
I
Imperfect information & fiscal foresight
I
New measures of the information flow: before, upon and after
Three orthogonal shocks :
I
1. Expected Fiscal Changes
agents forecast before their realisation
2. Unexpected Fiscal Changes
agents identify upon impact
2 / 25
A New Identification
Based on the Information Flow
Identification of fiscal spending shocks:
I
Imperfect information & fiscal foresight
I
New measures of the information flow: before, upon and after
Three orthogonal shocks :
I
1. Expected Fiscal Changes
agents forecast before their realisation
2. Unexpected Fiscal Changes
agents identify upon impact
3. Misexpected Fiscal Changes*
agents learn after the impact
* names borrowed from the Psychological literature
more...
2 / 25
A New Identification
Identification in the presence imperfect information
Delayed-information – e.g., Mankiw and Reis (2002)
...or Noisy-information – e.g., Woodford (2001)
I
I
I
I
Information slowly absorbed
−→ Forecast errors: current and past shocks
Correlated expectations revisions
−→ Proxies for shocks (conditional on their past)
Imperfect knowledge of the state of the Economy
−→ Nowcast errors (“misexpectations”)
Heterogenous beliefs
−→ Aggregation bias
More...
3 / 25
A New Identification
Identification in the presence imperfect information
Delayed-information – e.g., Mankiw and Reis (2002)
...or Noisy-information – e.g., Woodford (2001)
I
I
I
I
Information slowly absorbed
−→ Forecast errors: current and past shocks
Correlated expectations revisions
−→ Proxies for shocks (conditional on their past)
Imperfect knowledge of the state of the Economy
−→ Nowcast errors (“misexpectations”)
Heterogenous beliefs
−→ Aggregation bias
More...
3 / 25
A New Identification
Identification in the presence imperfect information
Delayed-information – e.g., Mankiw and Reis (2002)
...or Noisy-information – e.g., Woodford (2001)
I
I
I
I
Information slowly absorbed
−→ Forecast errors: current and past shocks
Correlated expectations revisions
−→ Proxies for shocks (conditional on their past)
Imperfect knowledge of the state of the Economy
−→ Nowcast errors (“misexpectations”)
Heterogenous beliefs
−→ Aggregation bias
More...
3 / 25
A New Identification
Identification in the presence imperfect information
Delayed-information – e.g., Mankiw and Reis (2002)
...or Noisy-information – e.g., Woodford (2001)
I
I
I
I
Information slowly absorbed
−→ Forecast errors: current and past shocks
Correlated expectations revisions
−→ Proxies for shocks (conditional on their past)
Imperfect knowledge of the state of the Economy
−→ Nowcast errors (“misexpectations”)
Heterogenous beliefs
−→ Aggregation bias
More...
3 / 25
A New Identification
Identification in the presence imperfect information
Delayed-information – e.g., Mankiw and Reis (2002)
...or Noisy-information – e.g., Woodford (2001)
I
I
I
I
Information slowly absorbed
−→ Forecast errors: current and past shocks
Correlated expectations revisions
−→ Proxies for shocks (conditional on their past)
Imperfect knowledge of the state of the Economy
−→ Nowcast errors (“misexpectations”)
Heterogenous beliefs
−→ Aggregation bias
More...
3 / 25
A New Identification
The approach of this paper
I
Use a large information set exceeding agents’ one...
4 / 25
A New Identification
The approach of this paper
I
Use a large information set exceeding agents’ one...
I
and individual forecasts (aggregation bias) to extract...
4 / 25
A New Identification
The approach of this paper
I
Use a large information set exceeding agents’ one...
I
and individual forecasts (aggregation bias) to extract...
I
...“news” (expectation revisions) at different horizons...
4 / 25
A New Identification
The approach of this paper
I
Use a large information set exceeding agents’ one...
I
and individual forecasts (aggregation bias) to extract...
I
...“news” (expectation revisions) at different horizons...
I
... and “misexpectations” (nowcast errors)...
4 / 25
A New Identification
The approach of this paper
I
Use a large information set exceeding agents’ one...
I
and individual forecasts (aggregation bias) to extract...
I
...“news” (expectation revisions) at different horizons...
I
... and “misexpectations” (nowcast errors)...
I
...and to identify expected, unexpected and misexpected
fiscal spending changes
4 / 25
A New Identification
Contributions
I
I
Information matters in shock identification
Expected/Unexpected fiscal expansion:
I
Large output effects
The multiplier for government spending is probably
between 0.8 and 1.5 [Ramey JEL (2011)]
I
Investment accelerator, not consumption
Prices increase, real exchange rate appreciates
I
I
Misexpected: reconciliation previous results
5 / 25
A New Identification
Contributions
Previous Contrib.
This Paper
Output Mult.
Investiment
Gov’t Spend
REE
CPI
6 / 25
A New Identification
Contributions
Previous Contrib.
This Paper
SVAR/EVAR
Output Mult.
Investiment
Gov’t Spend
REE
CPI
≤1
⇓
not persistent
⇓
=
6 / 25
A New Identification
Contributions
Previous Contrib.
Output Mult.
Investiment
Gov’t Spend
REE
CPI
This Paper
SVAR/EVAR
Misexp.
≤1
⇓
not persistent
⇓
=
≤1
⇓
not persistent
⇓
=
6 / 25
A New Identification
Contributions
Previous Contrib.
Output Mult.
Investiment
Gov’t Spend
REE
CPI
This Paper
SVAR/EVAR
Misexp.
≤1
⇓
not persistent
⇓
=
≤1
⇓
not persistent
⇓
=
Unexp.
>1
⇑
persistent
⇑
⇑
6 / 25
A New Identification
Contributions
Previous Contrib.
Output Mult.
Investiment
Gov’t Spend
REE
CPI
This Paper
SVAR/EVAR
Misexp.
Unexp./Exp.
≤1
⇓
not persistent
⇓
=
≤1
⇓
not persistent
⇓
=
>1
⇑
persistent
⇑
⇑
6 / 25
A New Identification
Contributions
Previous Contrib.
Output Mult.
Investiment
Gov’t Spend
REE
CPI
This Paper
SVAR/EVAR
Misexp.
Unexp./Exp.
≤1
⇓
not persistent
⇓
=
≤1
⇓
not persistent
⇓
=
>1
⇑
persistent
⇑
⇑
6 / 25
A New Identification
The effects of fiscal spending shocks: output
0.8
0.6
0.6
0.4
0.4
0.2
0.2
output elasticity
output elasticity
Output Effects of Fiscal Changes
0.8
0
−0.2
0
−0.2
−0.4
−0.4
−0.6
−0.6
−0.8
0
SVAR
4
8
12
(quarters)
Misexpected Fiscal Change
to GDP
16
−0.8
0
4
8
12
(quarters)
Unexpected Fiscal Change
to GDP
16
EVAR
7 / 25
A New Identification
The effects of fiscal spending shocks: output
Output Effects of Fiscal Changes
0.8
0.8
Misexp.
Large SVAR
Large EVAR
0.4
0.4
0.2
0.2
0
−0.2
0
−0.2
−0.4
−0.4
−0.6
−0.6
−0.8
0
SVAR
4
8
12
(quarters)
Misexpected Fiscal Change
to GDP
Unexp.
Large SVAR
Large EVAR
0.6
output elasticity
output elasticity
0.6
16
−0.8
0
4
8
12
(quarters)
Unexpected Fiscal Change
to GDP
16
EVAR
7 / 25
A New Identification
Related literature
I
Fiscal Policy: Ramey (2011), Perotti (2011), Leeper et al.
(2013), Leeper et al. (2012), Monacelli et al (2010); Caldara
and Kamps (2012), Mertens and Ravn (2010,2012), Alesina et
al. (2012), Corsetti et al (2012), Born et al (2013), Forni and
Gambetti (2014), Zeev and Pappa (2014) More...
I
Imperfect Information: Woodford (2001), Mankiw and Reis
(2002), Reis (2006a,b), Sims (2003), Mackowiak and
Wiederholt (2009), Coibion and Gorodnichenko (2010, 2012),
Andrade and Le Bihan (2013)
I
News and Imperfect Information: Beaudry and Portier
(2006), Barsky and Sims (2012), Blanchard et al. (2013),
Leduc and Sill (2010), Schmitt-Grohe and Uribe (2008),
Jaimovich and Rebelo (2009), Scheinkman and Xiong (2003),
Burnside et al. (2011), Forni et al (2014)
8 / 25
The Information Flow
8 / 25
E∗t ∆gt+h
E∗t+1 ∆gt+h
The Information Flow
c
Figure (1)
d
It = {gt−1 , Yt−1 ,
newst , . . . }
t
t+1
t+2
t+3
E∗t gt
E∗t gt+1
E∗t gt+2
..
.
E∗t gt+h
c
Figure (2)
9 / 25
The Information Flow
d
It+1 = {gt , Yt ,
newst+1 ,. . . }
t
t+1
t+2
t+3
E∗t+1 gt+1
E∗t+1 gt+2
..
.
E∗t+1 gt+h
c
Figure (3)
d
It+2 = {gt+1 , Yt+1 ,
9 / 25
E∗t+1 gt+h
The Information Flow
c
Figure (3)
d
It+2 = {gt+1 , Yt+1 ,
newst+2 ,. . . }
t
t+1
t+2
t+3
E∗t+2 gt+2
..
.
E∗t+2 gt+h
c
Figure (4)
9 / 25
The Information Flow
d
It+3 = {gt+2 , Yt+2 ,
newst+3 ,. . . }
t
t+1
t+2
t+3
c
9 / 25
The Information Flow
gt − E∗t−2 gt
|
{z
}
(g − E∗ g )
| t {z t t }
+
(E∗t gt − E∗t−1 gt )
|
{z
}
+
=
nowcast error
6∈ It
forecast error
2 periods ahead
+
+
nowcast revision
(news at t) ∈ It
(E∗t−1 gt − E∗t−2 gt )
|
{z
forecast revision
(news at t-1) ∈ It−1
}
10 / 25
The Information Flow
Nowcast errors
gt − E∗t−2 gt
|
{z
}
(gt − E∗t gt )
|
{z
}
+
(E∗t gt − E∗t−1 gt )
|
{z
}
+
=
nowcast error
6∈ It
forecast error
2 periods ahead
+
+
nowcast revision
(news at t) ∈ It
(E∗t−1 gt − E∗t−2 gt )
|
I
I
I
{z
forecast revision
(news at t-1) ∈ It−1
}
Measure of misexpectations
Modify agents’ information set at t+h (after)
Dominate VAR residuals, difficult to interpret
10 / 25
The Information Flow
Nowcast revisions
gt − E∗t−2 gt
|
{z
}
=
(g − E∗ g )
| t {z t t }
+
(E∗t gt − E∗t−1 gt )
|
{z
}
+
nowcast error
6∈ It
forecast error
2 periods ahead
+
nowcast revision
(news at t) ∈ It
+
(E∗ gt − E∗ gt )
| t−1 {z t−2 }
forecast revision
(news at t-1) ∈ It−1
I
I
I
Measure of fiscal news on the current quarter
Modify agents’ information set at t (upon)
Have predictive power and are easy to interpret
10 / 25
The Information Flow
Forecast revisions
gt − E∗t−2 gt
|
{z
}
=
(g − E∗ g )
| t {z t t }
+
(E∗t gt − E∗t−1 gt )
|
{z
}
+
nowcast error
6∈ It
forecast error
2 periods ahead
+
nowcast revision
(news at t) ∈ It
+
(E∗ gt − E∗ gt )
| t−1 {z t−2 }
forecast revision
(news at t-1) ∈ It−1
I
I
I
Measure of fiscal foresight
Modify agents’ information set at t-h (before)
Have predictive power and are easy to interpret
10 / 25
Fiscal Changes
Misperceived
on impact
Misexpected
Fiscal Changes
6∈ It
∼
proxy:
nowcast errors
gt − E∗t gt
Perceived on
impact
Unanticipated
Unexpected
Fiscal Changes
∈ It
∼
proxy:
nowcast revisions
E∗t gt − E∗t−1 gt
Anticipated
Expected
Fiscal Changes
∈ It
∼
proxy:
forecast revisions
E∗t gt+h − E∗t−1 gt+h
11 / 25
New Measures of Expectations
11 / 25
U.S. Survey of Professional Forecasters Data
Survey Date
...
2012Q2
2012Q3
2012Q4
...
History1
Quarterly Forecast
Q−1
Q0
Q+1
Q+2
Q+3
Q+4
...
...
...
...
...
G2012Q1
G2012Q2
G2012Q3
...
G2012Q2
G2012Q3
G2012Q4
...
G2012Q3
G2012Q4
G2013Q1
...
G2012Q4
G2013Q1
G2013Q2
...
G2013Q1
G2013Q2
G2013Q3
...
...
G2013Q2
G2013Q3
G2013Q4
...
Quarterly SPF forecasts:
I
current quarter and four quarters ahead
I
information sets: previous quarter GDP and components
(advance estimate)
I
deadline: third week of the middle month
I
U.S. Fed Spending from 1981:Q3 to 2012:Q4
1
More...
BEA advance estimate
12 / 25
B.Obama (I)
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
SPF Forecasts − Four Quarters Ahead
B.Obama (I)
G.W.Bush (II)
B.Clinton (I)
B.Clinton (II)
G.W.Bush (I)
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
Gulf War II − JTRRA
10
Gulf War II − JTRRA
War Afghanistan
EGTRRA
Kosovo War
Fed Shutdown
Berlin Wall Fall
H.W.Bush
Tax
Reform
Balanced
Budget
Balanced Budget (II)
Berlin Wall Fall
Fed Shutdown
Kosovo War
War Afghanistan
EGTRRA
9/11
Gulf War
G.W.Bush (II)
G.W.Bush (I)
2010
2000
1995
1990
1985
−10
R. Reagan (II)
5
Balanced Budget (II)
SPF Nowcast − Current Quarter
% Fed Spend Growth Rate − SPF Forecast
1985
B.Clinton (II)
2010
2000
1995
1990
9/11
Gulf War
−4
B.Clinton (I)
2
Tax
Reform
Balanced
Budget
−5
Star Wars
ERTA
0
Star Wars
ERTA
0
H.W.Bush
4
2005
−2
R. Reagan (II)
6
2005
% Fed Spend Growth Rate − SPF Forecast
SPF Forecast & Actual Government Growth
SPF Expected Government Spending Growth Rate
13 / 25
Do Agents Have Full Information?
Granger causation test with factors from a large dataset # 128
Factor1
Factor2
Factor3
Factor4
Fstat p-value Fstat p-value Fstat
p-value Fstat p-value
Forecast Err. 2.99** (0.05) 0.57
(0.64) 3.95*** (0.01) 2.97
(0.04)
Nowcast Err. 1.07
(0.35) 0.00
(1.00) 6.21*** (0.00) 1.24
(0.29)
I
Forecast and nowcast errors are forecastable
I
Forecast revisions (‘news’) and forecast errors are correlated
Presence of information rigidities! [Coibion and Gorodnichenko
(2010, 2012), Andrade and Le Bihan (2012)]
14 / 25
Empirical Measures of Fiscal News
Aggregate economy
Nowcast Errors
n\
.c .err t = Median(gt − E∗i
t gt )
Fiscal News on the current quarter
∗i
n[
ews t (0) = Median(E∗i
t gt − Et−1 gt )
Fiscal News three quarters ahead
3
X
∗i
n[
ews t (1, 3) = Median
(E∗i
t gt+h − Et−1 gt+h )
!
h=1
Spectra...
Other Macro Shocks...
Individual vs Aggregated...
15 / 25
2010
% Growth Ra
Debt−ceiling Crisis
2005
Health Care Act
Stimulus 2009
Stimulus 2008
2000
Iraq Troop Surge
9/11
1995
Hurr. Katrina
War Afghanistan
EGTRRA
Kosovo War
Gulf War
1990
Fed Shutdown
Berlin Wall Fall
1985
Balanced Budget (II)
−4
Tax
Reform
Balanced
Budget
ERTA
−2
Current quarter
Gulf War II − JTRRA
0
SPF Implied News and Nowcast Errors
SPF Real Federal Goverment Spending Growth − Nowcast Errors
R. Reagan (II) H.W.Bush
B.Clinton (I)
B.Clinton (II)
G.W.Bush (I)
G.W.Bush (II)
B.Obama (I)
Mean
Median
2
2010
Debt−ceiling Crisis
2005
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
2000
Hurr. Katrina
9/11
1995
Gulf War II − JTRRA
War Afghanistan
EGTRRA
Kosovo War
Gulf War
1990
Fed Shutdown
1985
Berlin Wall Fall
−4
Balanced Budget (II)
−2
Tax
Reform
Balanced
Budget
0
ERTA
% Growth Rate
4
SPF Real Federal Goverment Spending Growth − Implied News Q0/Q−1
R. Reagan (II) H.W.Bush
B.Clinton (I)
B.Clinton (II)
G.W.Bush (I)
G.W.Bush (II)
B.Obama (I)
Median
Mean
2
2010
Debt−ceiling Crisis
Health Care Act
2005
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
9/11
2000
Gulf War II − JTRRA
War Afghanistan
EGTRRA
1995
Kosovo War
Gulf War
1990
Fed Shutdown
1985
Berlin Wall Fall
−4
Balanced Budget (II)
−2
Tax
Reform
Balanced
Budget
0
ERTA
% Growth Rate
4
SPF Real Federal Goverment Spending Growth − Implied News Q3/Q0
4
R. Reagan (II) H.W.Bush
B.Clinton (I)
B.Clinton (II)
G.W.Bush (I)
G.W.Bush (II)
B.Obama (I)
Median
Mean
16 / 25
B.Obama (I)
Debt−ceiling Crisis
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
SPF Forecasts Revisions One Year Head
B.Obama (I)
G.W.Bush (II)
B.Clinton (II)
G.W.Bush (I)
Debt−ceiling Crisis
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
Gulf War II − JTRRA
4
Gulf War II − JTRRA
War Afghanistan
EGTRRA
Kosovo War
Fed Shutdown
Balanced Budget (II)
Berlin Wall Fall
Fed Shutdown
Kosovo War
War Afghanistan
EGTRRA
9/11
Gulf War
G.W.Bush (II)
G.W.Bush (I)
B.Clinton (II)
2010
2000
1995
1990
1985
B.Clinton (I)
H.W.Bush
−4
Tax Reform
Balanced
Budget
ERTA
−2
Berlin Wall Fall
SPF Forecasts Revisions Current Quarter
% Growth Rate − SPF Forecasts Revisions
1985
Balanced Budget (II)
0
R. Reagan (II)
2
1995
1990
9/11
Gulf War
Tax Reform
Balanced
Budget
ERTA
−4
B.Clinton (I)
2010
2000
2005
−2
H.W.Bush
0
R. Reagan (II)
2
2005
% Growth Rate − SPF Forecasts Revisions
SPF Implied News
Current and future quarters
SPF Implied News
17 / 25
B.Obama (I)
Debt−ceiling Crisis
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
B.Obama (I)
G.W.Bush (II)
B.Clinton (II)
G.W.Bush (I)
Debt−ceiling Crisis
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
Gulf War II − JTRRA
SPF Forecasts Revisions One Year Head
Gulf War II − JTRRA
War Afghanistan
EGTRRA
Kosovo War
Fed Shutdown
B.Clinton (I)
Berlin Wall Fall
Fed Shutdown
Kosovo War
War Afghanistan
EGTRRA
9/11
Gulf War
G.W.Bush (II)
G.W.Bush (I)
B.Clinton (II)
2010
2000
1995
1990
1985
Balanced Budget (II)
−4
Tax Reform
Balanced
Budget
ERTA
−2
H.W.Bush
0
Berlin Wall Fall
SPF Forecasts Revisions Current Quarter
% Growth Rate − SPF Forecasts Revisions
1985
Balanced Budget (II)
2
R. Reagan (II)
4
1995
1990
9/11
Gulf War
Tax Reform
Balanced
Budget
ERTA
−4
B.Clinton (I)
2010
2000
2005
−2
H.W.Bush
0
R. Reagan (II)
2
2005
% Growth Rate − SPF Forecasts Revisions
SPF Implied News
Current and future quarters
SPF Implied News
17 / 25
The Empirical Model: Large Bayesian EVAR
17 / 25
Large EVAR
Expectational Variables 1: News & Nowcast Errors
Expectational Variables 2: Forecasts for GDP and
Unemployment
Expectational Variables 3: Forward looking variables: prices,
inventories, CEO confidence, consumer confidence, . . .
Macroeconomic variables: Federal spending, S&L spending,
Barro-Redlick tax rate, GPD, wages, durables, nondurables
and services consumption, investment, real rates, 10-y rates,
real exchange rates, . . .
Large VAR [Banbura et al. (2010)] with Litterman priors and
sum-of-coefficients priors. Hyperpriors [Giannone, Lenza, Primiceri
(2012)]
18 / 25
Identification of Fiscal Changes
A last spin
Structural Identification – Assumptions
1. fiscal policy doesn’t respond to contemporaneous
macro-shocks
2. new information before, upon and after actual change
3. new information slowly absorbed
4. spending forecasts incorporate systematic policy responses
5. three shocks are orthogonal
Recursive identification
n[
ews t (0)
n\
.c .err t
Ê∗t GDPt
Ê∗t Ut
n[
ews t (1, 3)
Yt0
0
19 / 25
Empirical Results
19 / 25
Unexpected Fiscal Changes
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
Marginal Tax Rate
2
0.5
0.2
1
0
0
0
−0.2
−0.5
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
0.2
0
−0.2
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
0
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
0
−2
0
16
4
8
12
16
quarters
Civilian Unemployment Rate
4
8
12
quarters
Services Consumption
16
0.2
0
−0.2
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
200
2
1
8
12
quarters
Real Wages
0.4
0
−1
0
16
0.4
0.2
0
−0.2
1
4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
0
−200
−2
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.5
0
2
40
1
20
0
0
0
−0.5
−20
−1
0
4
8
12
16
quarters
Consumer Sentiment Index
200
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
200
90% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
68% C.I.
IRF
0
4
8
quarters
12
16
20 / 25
Unexpected Fiscal Changes: Gov’t Spending
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
Marginal Tax Rate
2
0.5
0.2
1
0
0
0
−0.2
−0.5
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
0.2
0
−0.2
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
16
0
0
4
8
12
16
quarters
Nonresidential Fixed Investment
U
8
12
16
quarters
Civilian Unemployment Rate
Fed Spend
2
0
4
8
12
quarters
Services Consumption
0
16
1
0.2
0
0
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
12
quarters
S&P 500 (%)
16
0
−0
0
200
0
0
−1
4
16
−0.2
2
1
0
8
12
quarters
Real Wages
0.4
0.4
0.2
0
−0.2
1
−1
4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
4
0
−2
−200
−2
0
4
8
12
quarters
Real Rates
16
0.5
0
0
4
8
12
quarters
10−Year Treasury Rate
16
2
20
1
0
0
0
4
8
12
16
quarters
Consumer Sentiment Index
200
4
8
12
quarters
Real Exchange Rate
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
200
90% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
16
−1
−20
−0.5
0
40
68% C.I.
IRF
0
4
8
quarters
12
16
16
8
quarters
GDP
12
16
0
0.4
0.2
0
−0.2
−0.4
0
−0
0
4
8
12
quarters
Consumer Price Index
16
20 / 25
U
Unexpected Fiscal Changes: GDP
Fed Spend
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
0.5
0.2
1
0
0
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
0
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
0
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
16
4
8
12
quarters
Services Consumption
16
0.2
0
−0.2
4
8
12
16
quarters
Residential Fixed Investment
0
2
200
0
0
0
−2
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Rates
16
0.5
0
4
8
12
quarters
10−Year Treasury Rate
16
2
20
1
0
0
4
8
12
quarters
Real Exchange Rate
16
0
4
8
12
16
quarters
Consumer Sentiment Index
200
0
0
−0
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
90% C.I.
0
0
−200
0
4
8
quarters
12
16
4
8
12
quarters
Consumer Price Index
16
0
10
200
−200
16
−1
−20
−0.5
0
40
12
0
−200
0
8
quarters
GDP
0.4
0.2
0
−0.2
−0.4
−2
0
4
4
8
12
16
quarters
Civilian Unemployment Rate
0.4
0
−0
0
0
−1
1
8
12
quarters
Real Wages
0
0
16
0.4
0.2
0
−0.2
1
4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
0.2
−0.2
0
1
−0.2
−0.5
0
2
Marginal Tax Rate
2
16
0
−10
−0
68% C.I.
IRF
0
4
8
quarters
12
16
0
4
8
12
quarters
Durables Consumption
16
20 / 25
0
−0
0
Unexpected Fiscal Changes: CPI Inflation
4
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
0.5
0.2
1
0
0
−0.2
−0.5
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
0
0
4
8
12
16
quarters
Nonresidential Fixed Investment
8
12
quarters
Real Wages
16
0
−0
4
8
12
16
quarters
Civilian Unemployment Rate
4
8
12
quarters
Services Consumption
16
8
12
quarters
Real Rates
16
0
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−10
−0
0
200
0
−200
0
4
8
12
quarters
10−Year Treasury Rate
16
0
2
40
0.5
0
0
−20
−1
0
4
8
12
16
quarters
Consumer Sentiment Index
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
200
90% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
4
8
12
quarters
Durables Consumption
16
0
0
1
1
20
0
−0.5
200
16
0
0.2
0
−2
4
8
12
quarters
Consumer Price Index
10
−2
0
4
0
0
0.4
0
0
−1
4
−0.2
2
1
0
0
0
16
0.4
0.2
0
−0.2
1
−1
16
0.4
0.2
0
−0.2
−0.4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
0.2
−0.2
0
12
Marginal Tax Rate
2
0
8
quarters
GDP
16
0
−0
−1
68% C.I.
IRF
0
4
8
quarters
12
16
0
4
8
12
16
quarters
Nonresidential Fixed Investment 20 / 25
0
−0
−0.5
0
4
8
quarters
GDP
Unexpected Federal Fiscal Change
12
16
0
4
8
12
quarters
Output Per Hour
Unexpected Fiscal Changes: Worked Hours
Fed Spend
2
1
0
0
4
8
quarters
GDP
0.4
0.2
0
−0.2
−0.4
0
S&L Spend
0.4 0.5
0.2 0
−0.5
12
160
0
−0.2 0.4
0.2
−0.4 0
0−0.2
4
8
12
quarters
Consumer Price Index
16
0
−0.2
4
8
12
quarters
Output Per Hour
16
16
10
0
1
0
−10
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
1
4
4
8
12
quarters
Real Rates
16
−0.5
0
0
4
200
4
8
12
16
quarters
Residential Fixed Investment
−1
1
0
0
8
quarters
12
16
8
12
quarters
Total Worked Hours
16
2
1
16
16
−1
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
−0.5
16
0
16
−1
4
16
200
90% C.I.
0
4
8
12
quarters
S&P 500 (%)
12
quarters
Real Exchange Rate
20
0
0
0
4
8 200
12
0
quarters
−200
Durables
Consumption
4
8
12
16
0
4
8
2
4
8
12
quarters
Nondurables Consumption
16
0
0.4
0.2
0
−0.2
0
−0
68% C.I.
8
12IRF
16
0
4
8
12
16
quarters
quarters
Nonresidential Fixed Investment
−200
−200
4
8
12
quarters
Services Consumption
4
−20
0
4
0
0
40
8
12
16
quarters
Consumer Sentiment Index
0
0.5
0
quarters
10−Year Treasury Rate
0
−0
−0
0
0
1
0.5
16
0.2
−2
0
4
8
12
quarters
Nondurables Consumption
0.4
02
0
0
−0.2
−0.2
0
−2
16
8
12
16
16
0
4
8
12
16
quarters
quartersCivilian Unemployment
Rate
Consumer Price
Index
20
0.4
0.2
0
−0.2
0
8
12
quarters
Real Wages
10
0
−10
0
−1
4
4
8
12
quarters
Total Worked Hours
0
4
8
12
quarters
Durables Consumption
0
0.4
0.2
0
−0.2
−0.4
−0.5
0
0
0
0.2
0
0.5
0
0.4
Marginal Tax Rate
0.2
10
−10
16
4
0
4
8
12
16
quarters
Residential Fixed Investment 20 / 25
−0.4
0
4
Unexpected Fiscal Changes: Consumption
8
12
quarters
Consumer Price Index
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
Marginal Tax Rate
2
0.5
0.2
1
0
0
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
0.2
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
0
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
0
−2
0
−0
0
4
8
12
16
quarters
Civilian Unemployment Rate
0
4
8
12
quarters
Services Consumption
16
0.4
4
8
12
quarters
Real Rates
16
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
12
quarters
S&P 500 (%)
16
0
0
4
8
12
quarters
Real Exchange Rate
16
−0
−1
0
200
0
−200
0
4
8
12
quarters
10−Year Treasury Rate
16
0
1
20
0
0
0
−20
−1
4
8
12
16
quarters
Consumer Sentiment Index
0
200
200
0
0
4
8
12
quarters
CB CEO Confidence Index
16
4
8
quarters
12
68% C.I.
−200
0
4
8
quarters
12
16
IRF
0
4
8
quarters
12
16
8
12
16
quarters
Nonresidential Fixed Investment
0
0
90% C.I.
−200
4
1
2
−0.5
0
16
0
40
0.5
8
12
quarters
Durables Consumption
1
−2
0
4
0
0.2
2
1
16
−0.2
0
−1
8
12
quarters
Real Wages
−10
0
16
0.4
0.2
0
−0.2
1
−1
4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
−0.2
0
0
10
−0.2
−0.5
0
16
16
−1
−
−2
0
4
8
12
quarters
Real Rates
16
20 / 25
−0
−0.4
0
4
8
12
quarters
UnexpectedConsumer
Federal Fiscal ChangePrice Index
16
0
8
12
quarters
Total Worked Hours
Unexpected Fiscal Changes: Consumption
Fed Spend
S&L Spend
2
10
1
0
0
4
8
quarters
GDP
12
0.4
0.2
0
−0.2
−0.4
Marginal Tax Rate
0.5
0.2
0
0
0
−0.5
−10
0.4
16
4
8
12
quarters
Output Per Hour
16
0
0
4
8
12
quarters
Consumer Price Index
16
4
0
0
4
8
12
quarters
Durables Consumption
1
1
0
0.4
0.2
0
−0.2
16
0
−1
0
−1
4
8
12
16
quarters
Nonresidential Fixed Investment
1
0
−1
−2
0
4
8
12
quarters
Real Rates
16
0
0
−0.5
0
4
8
12
quarters
Nondurables Consumption
16
0
16
0.2
0
−0.2
0
02
4
8
12
16
quarters
Residential Fixed Investment
0
4
4
8
12
quarters
S&P 500 (%)
16
quarters
Real Exchange Rate
40
2
20
1
0
0
0
4
8
12
quarters
CB CEO Confidence Index
16
4
8
12
quarters
Nondurables Consumption
16
0
0.4
0.2
0
−0.2
0
−0
0
4
8
12
16
quarters
Residential Fixed Investment
20
2
0
−1
−20
−1
−1
0
8 200
12
16
0
0
quarters
−2
−200
Nonresidential
Fixed
Investment
0
4
8
12
16
0
4
8
12
16
4
8
12
16
quarters
Consumer Sentiment Index
200
4
8
12
quarters
Services Consumption
0.4
quarters
10−Year Treasury Rate
1
0.5
0
0
−0.5
10
0
−10
0
−0.5
16
8
12
16
16
0
4
8
12
16
quarters
quartersCivilian Unemployment
Rate
Durables Consumption
20
0.5
0
8
12
quarters
Real Wages
2
1
4
8
12
quarters
Total Worked Hours
10
−10
4
0.4
0.2
0
−0.2
−0.4
0.2
−0.2
0
0
16
0.5
−0.2
0
4
0
4
8
quarters
12
16
−2
−20
200
−2
0
90% C.I.
0
68% C.I.
0−200
−200
0
4
8
quarters
12
16
4
0
4
8
quarters
8
12IRF
16
quarters
Real Rates
12
16
0
4
8
12
quarters
10−Year Treasury Rate
16
20 / 25
−0.4
8
12
rters
Price Index
16
0
0
4
Unexpected Fiscal Changes: Consumption
Fed Spend
0.5
2
0
4
0.4
0.2
0
−0.2
−0.4
8
quarters
GDP
12
0
8
12
quarters
Total
Worked
Hours
Unexpected Federal
Fiscal
Change
S&L Spend
0.2
0
0
−0.5
−0.2
−0.5
16
0
4
8
12
quarters
Output Per Hour
16
0.4
16
0.2
0−0.2
4
8
12
quarters
Consumer Price Index
16
4
0
0.5
0
1
0
−1
0
0.4
4
8
12
16
quarters
Durables Consumption
0.2
0
−0.2
4
8
12
16
quarters
Nonresidential Fixed Investment
8
12 1
16
0
rters
−1
−2
Fixed Investment
0
4
8
0
12
quarters
Real Rates
16
0
0
−0.5
16
0
4
8
12
quarters
Services Consumption
16
0.4
0
4
8
12
quarters
Services Consumption
16
0.2
0
0.2
0
−0.2
4
8
12
16
quarters
Residential Fixed Investment
0
4
4
8
12
quarters
S&P 500 (%)
16
−0.2
8 200
12
16
0
quarters
−200
Residential
Fixed
Investment
0
4
8
12
16
0
4
8
12
16
quarters
Real Exchange Rate
40
2
20
1
0
0
0
−2
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
12
quarters
S&P 500 (%)
16
0
4
8
12
quarters
Real Exchange Rate
16
200
0
−1
−20
4
8
12
16
quarters
Consumer Sentiment Index
200
4
8
12
quarters
Nondurables Consumption
quarters
10−Year Treasury Rate
2
0.5
0
2
16
0.4
0
−2
8
12
quarters
Real Wages
10
0
−10
0.4
0.2
0
−0.2
0
4
20
10
0
−10
8
12
16
16
0
4
8
12
16
quarters
quarters Civilian Unemployment
Rate
Nondurables Consumption
20
−0.5
0
8
12
16
quarters
Civilian Unemployment Rate
4
8
12
quarters
Total Worked Hours
0
0
−10
0
0.4
0.2
0
−0.2
−0.4
0
8
12
0
rters
Consumption10
16
Marginal Tax Rate
0.5
1
0
4
0
4
8
quarters
12
16
−200
200
90% C.I.
0
8
12−200
0
rters
Rates
0
16
4
8
quarters
68% C.I.
0
4
−200
12
16
0
8
12IRF
4
8
12
16
quarters
quarters
10−Year Treasury Rate
16
20 / 25
−10
−0
0
Unexpected Fiscal Changes: Investment
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
0.5
0.2
1
0
0
0
−0.5
0
4
8
quarters
GDP
12
16
4
8
12
quarters
Output Per Hour
16
0.4
0.2
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
0
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
8
12
quarters
Real Wages
16
0
−0
0
4
8
12
16
quarters
Civilian Unemployment Rate
0
4
8
12
quarters
Services Consumption
16
4
8
12
16
quarters
Nonresidential Fixed Investment
1
0
0.4
0.2
−1
0
−
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment
0
2
200
0
0
0
−1
−2
1
0
0
−1
0
16
0.4
0.2
0
−0.2
1
4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
−0.2
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−2
0
4
−200
−2
0
4
8
12
quarters
Real Rates
16
0.5
0
0
4
8
12
quarters
10−Year Treasury Rate
16
0
2
20
1
0
0
4
8
12
16
quarters
Consumer Sentiment Index
200
0
40
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
200
90% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
8
12
quarters
Real Rates
16
4
0.5
−1
−20
−0.5
16
1
−0.2
0
8
12
quarters
Durables Consumption
Marginal Tax Rate
2
0.4
0.2
0
−0.2
−0.4
4
16
2
0
−2
−0.5
68% C.I.
IRF
0
4
8
quarters
12
16
0
4
8
12
16
quarters
Consumer Sentiment Index
20 / 25
−0.2
−1
0
4
8
12
16
quarters
Nonresidential
Fixed Investment
Unexpected
Federal Fiscal Change
−0
0
8
12
16
quarters
Residential Fixed Investment
Unexpected Fiscal Changes: 10-Year Rate
Fed Spend
S&L Spend
2
1
1
Marginal Tax Rate
0.5
0.2
0
0
0 −0.5
0
0
4
8
quarters
GDP
12
16
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
−2
0
0−0.2
0
4
8
12
quarters
Consumer Price Index
16
4
0
0.5
0
4
8
12
quarters
Durables Consumption
16
0.5
0
1
0
−0.5
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
1
0
8
12
quarters
Real Rates
16
0
−0.5
0
200
−200
4
8
12
16
quarters
Residential Fixed Investment
1
0
0
0
4
8
12
quarters
CB CEO Confidence Index
8
quarters
12
16
8
12
quarters
S&P 500 (%)
16
16
−
−20
0
4
8
12
quarters
CB CEO Confidence Index
16
200
0
0
4
8
quarters
12
16
−200
200
90% C.I.
68% C.I.
0
4
4
−1
−20
0
0
16
20
quarters
Real Exchange Rate
2
20
4
−200
−200
8
12
quarters
10−Year Treasury Rate
16
8 200
12
16
0
quarters
−200
Consumer
Sentiment
Index
4
8
12
16
0
4
8
12
16
quarters
10−Year Treasury Rate
0
4
0
0
40
4
8
12
16
quarters
Consumer Sentiment Index
4
8
12
quarters
Services Consumption
4
0
0
0
0
200
0.5
−20
40
0
−0.2
−2
4
16
0.2
02
0
−2
0.4
0
−2
0
4
8
12
quarters
Nondurables Consumption
0.4
0.2
0
−0.2
0
16
10
0
−10
−0.5
−1
8
12
quarters
Real Wages
8
12
16
16
0
4
8
12
16
quarters
quartersCivilian Unemployment
Rate
Real Rates
20
0
0
4
4
8
12
quarters
Total Worked Hours
10
−10
0
0
0.4
0.2
0
−0.2
−0.4
0.2
20
2
−0.2
0
−1
4
0
4
8
quarters
12
8
16
quarters
12
IRF
16
0
4
8
quarters
12
16
20 / 25
−0.2
8
12
16
rters
Fixed Investment
−0.2
0
4
8
Unexpected Fiscal Changes: Real Exchange
Rate
quarters
Fed Spend
2
0
0
4
0.4
0.2
0
−0.2
−0.4
8
quarters
GDP
12
4
8
12
16
quarters
Residential
Fixed Investment
Unexpected
Federal Fiscal Change
S&L Spend
2
0.5
0
−0.5
1
8
12
rters
Rates
4
8
12
quarters
Output Per Hour
16
0.4
16
0
16
0
0.5
10
40
0
4
8
12
quarters
Durables Consumption
0
−20
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
16
0
−200
0
1
16
4
8
quarters
4
8
12
quarters
CB CEO Confidence Index
16
16
0
4
8
quarters
12
16
90% C.I.
0
4
8
quarters
12
16
68% C.I.
IRF
200
90% C.I.
68% C.I.
0
16
8
12
quarters
S&P 500 (%)
−1
0
4
−200
12
4
0
0
0
0
1
quarters
Real Exchange Rate
2
−20
0
12−200
16
8 200
12
16
0
quarters
−200
CB
CEO
Confidence
Index
4
8
12
16
0
4
8
12
16
20
8
12
16
quarters
Consumer Sentiment Index
4
−1
0
40
4
200
8
12
16
quarters
Residential Fixed Investment
quarters
10−Year Treasury Rate
0
0
4
4
0
0.5
4
8
12
quarters
Services Consumption
0
2
0
2
0
−0.2
0
200
−0.5
16
0.2
0
12
−200
0.4
−2
quarters
Real Rates
4
8
12
quarters
Nondurables Consumption
0.4
0.2
0
−0.2
0
16
16
10
0
−10
20
0
1
8
12
quarters
Real Wages
8
12
16
16
0
4
8
12
16
quarters
quarters Civilian Unemployment
Rate
10−Year Treasury
Rate
20
−0.5
16
4
4
8
12
quarters
Total Worked Hours
0
0
−10
8
12
quarters
Real Exchange Rate
S&P 500 (%)
0
0
0.4
0.2
0
−0.2
−0.4
4
−0.2
4
8
12
quarters
Consumer Price Index
16
200
−0.2
0
0
0
12
0
0
16
−2
Marginal Tax Rate
0.2
0.2
8
12 1
16
0
rters
−1
−2
entiment Index
0
4
8
8
rters
0
0
4
8
quarters
8
16
quarters
12
IRF
16
12
20 / 25
−2
0
4
8
12
Unexpected Fiscal Changes: Consumers
Confidence
quarters
Real Rates
Unexpected Federal Fiscal Change
Fed Spend
S&L Spend
Marginal Tax Rate
2
0.5
0.2
1
0
0
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.4
0.4
0.2
0
−0.2
−0.4
0
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Total Worked Hours
16
0.5
0
0
−0.5
0
4
8
12
quarters
Durables Consumption
16
0
4
8
12
quarters
Nondurables Consumption
0
−1
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
0
−2
2
0
−2
0
4
8
12
16
quarters
Civilian Unemployment Rate
4
8
12
16
quarters
Consumer Sentiment Index
200
0
4
8
12
quarters
Services Consumption
20
16
0
0.2
0
−0.2
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−20
−200
0
200
2
1
16
0.4
0
−1
8
12
quarters
Real Wages
−0.5
0
16
0.4
0.2
0
−0.2
1
4
20
10
0
−10
10
−10
0
0.4
0.2
0
−0.2
−0.4
0.2
−0.2
4
0.5
−0.2
−0.5
0
16
0
4
8
quarters
12
16
−200
−2
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.5
0
2
40
1
20
0
0
0
−0.5
−20
−1
0
4
8
12
16
quarters
Consumer Sentiment Index
200
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
200
90% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
68% C.I.
IRF
0
4
8
quarters
12
16
20 / 25
Expected Fiscal Changes
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
Marginal Tax Rate
0.5
0.2
0
0
1
0
−0.2
−0.5
−1
−0.4
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
4
8
12
quarters
Total Worked Hours
16
8
12
quarters
Durables Consumption
16
0
4
8
12
16
quarters
Civilian Unemployment Rate
20
0
0
4
16
0
0
−20
−40
−1
0
8
12
quarters
Real Wages
0.5
−0.5
−20
4
−0.5
0.5
0
−10
0
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0.5
2
0.5
0
0
0
−0.5
−0.5
−2
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
6
4
2
0
−2
2
0
−2
0
4
8
12
quarters
Real Rates
16
1
0
0
8
12
16
quarters
Consumer Sentiment Index
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
200
0
0
4
4
−200
4
8
12
quarters
10−Year Treasury Rate
16
60
40
20
0
−20
−40
−1
0
0
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
400
400
90% C.I.
200
200
68% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
IRF
0
4
8
quarters
12
16
21 / 25
Expected Fiscal Changes: Gov’t Spending
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
Marginal Tax Rate
0.5
0.2
0
0
1
0
−0.2
−0.5
−1
−0.4
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
−20
0
4
8
12
quarters
Durables Consumption
8
12
quarters
Real Wages
16
0.5
0
0
4
8
12
quarters
Total Worked Hours
16
0
4
8
12
16
quarters
Civilian Unemployment Rate
Fed Spend
20
0
0
−0.5
−20
−1
−40
16
4
−0.5
0.5
0
−10
0
0
4
8
12
quarters
Nondurables Consumption
16
2
0
4
8
12
quarters
Services Consumption
0
16
1
0.5
2
0.5
0
0
4
8
12
16
quarters
Nonresidential Fixed Investment
2
0
0
4
8
12
quarters
Real Rates
16
1
4
8
12
16
quarters
Residential Fixed Investment
−1
0
4
8
12
quarters
S&P 500 (%)
16
−1
0
200
4
0
0
4
8
12
16
quarters
Consumer Sentiment Index
0
−200
4
8
12
quarters
10−Year Treasury Rate
16
60
40
20
0
−20
−40
0
−0
−0.5
0
6
4
2
0
−2
−2
0
0
0
−0.5
−2
0
4
8
12
quarters
Real Exchange Rate
16
2
8
quarters
GDP
12
16
0
0
0
0
0.5
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
0
−0
−0
400
400
200
0
200
90% C.I.
0
68% C.I.
−200
−200
0
4
8
quarters
12
16
IRF
0
4
8
quarters
12
16
−0.5
0
4
8
12
quarters
Consumer Price Index
16
21 / 25
Expected Fiscal Changes: GDP
Fed Spend
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
0.5
0
0
0.2
1
−1
2
Marginal Tax Rate
0
0
−0.5
−0.2
1
−0.4
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
−20
4
8
12
quarters
Durables Consumption
16
0
−0
−1
0
−0.5
0
4
8
12
quarters
Total Worked Hours
16
0
4
4
8
12
16
quarters
Civilian Unemployment Rate
20
0
0
−0.5
−20
16
8
12
quarters
Real Wages
0
−40
−1
0
4
0.5
0.5
0
−10
0
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
8
quarters
GDP
12
16
0
0
0
0
0.5
0.5
2
0.5
0
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
6
4
2
0
−2
2
0
−2
0
4
8
12
quarters
Real Rates
16
1
−1
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
200
0
8
12
quarters
10−Year Treasury Rate
16
0
0
4
8
quarters
12
16
4
8
12
quarters
Consumer Price Index
16
10
0
2
0
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
200
90% C.I.
0
68% C.I.
−200
−200
0
0
4
400
400
−0.5
200
0
4
8
12
16
quarters
Consumer Sentiment Index
0
−200
60
40
20
0
−20
−40
0
−0
−0
−0.5
−0.5
−2
0
0
0
IRF
0
4
8
quarters
12
16
16
−10
−0
−20
−
0
4
8
12
quarters
Durables Consumption
16
21 / 25
Expected Federal Fiscal Change
Expected Fiscal Changes: Output per Hour
Fed Spend
S&L Spend
Expected Federal Fiscal Change
2
Fed Spend
2
1
0
−1
S&L Spend
Marginal Tax Rate
0.5
0.2
1 −0.50
−0.2
0.5
0
4
8
quarters
GDP
12
16
0
0
−1
0.5
0
4
8
12
quarters
Output Per Hour
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0
4
8
12
quarters
Consumer Price Index
16
10
4
0
4
8
12
quarters
Total Worked Hours
0
4
8
12
quarters
Durables Consumption
16
0.5
8
12
quarters
Real Wages
16
−0
0
4
0
−20
−40
−1
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0.5
2
0
0
0.5
0
0
−0.5
−0.5
−2
0
−0.5
4
8
12
16
quarters
Nonresidential Fixed Investment
2
0
06
0
0
4
8
12
quarters
Real Rates
1
0
16
10
0
−1
0
0
200
0
0
4
8
quarters
12
16
8
12
quarters
S&P 500 (%)
0
16
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
16
0
−0
0
16
4
8
12
quarters
Total Worked Hours
16
2
0.5
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
200
90% C.I.
0
68% C.I.
4
0
4
8
12IRF
quarters
Durables Consumption
8
quarters
12
16
0
−2
−0.5
400
0−200
−200
4
12
quarters
Real Exchange Rate
quarters
10−Year Treasury Rate
−10
−20
0
8 200
12
0
quarters
−200
Consumer
Price
Index
4
8
12
16
0
4
8
60
40
20
0
−20
−40
4
8
12
16
quarters
Consumer Sentiment Index
400
4
8
12
16
quarters
Residential Fixed Investment
4
4
2
0
−2
−2
−0
−0.5
8 −0.5
12
16
0
4
8
12
16
quarters
quartersCivilian Unemployment
Rate
GDP20
−0.5
−20
4
16
0
−10
0
0
0.5
0
16
0
0.5
0
−0.5
0
0
−0.4
−4
−1
16
0
4
8
12
quarters
Nondurables Consumption
16
21 / 25
−1
0
Expected Fiscal Changes: CPI Inflation
4
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
0
0.2
0
0
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
−20
4
8
12
quarters
Durables Consumption
8
12
quarters
Real Wages
16
0
4
8
12
quarters
Total Worked Hours
16
−0
−0
−0.5
0
−0.5
0
0
4
8
12
16
quarters
Civilian Unemployment Rate
20
0
0
−0.5
−20
16
4
0
0
4
8
12
quarters
Nondurables Consumption
16
4
8
12
quarters
Consumer Price Index
16
10
−40
−1
0
0
0.5
0.5
0
−10
0
0
0
0
0.5
−0.4
4
16
−0.2
−0.5
0
12
Marginal Tax Rate
0.5
1
−1
8
quarters
GDP
0
4
8
12
quarters
Services Consumption
0
16
0
0.5
2
0.5
0
0
4
8
12
16
quarters
Nonresidential Fixed Investment
−0.5
0
4
8
12
16
quarters
Residential Fixed Investment
6
4
2
0
−2
2
0
−2
0
4
8
12
quarters
Real Rates
16
1
−1
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−0
−20
−
0
0
−200
0
4
8
12
16
quarters
Consumer Sentiment Index
0
200
4
8
12
quarters
10−Year Treasury Rate
16
60
40
20
0
−20
−40
0
−10
0
0
−0.5
−2
0
200
0
2
0
4
8
quarters
12
16
16
0
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
200
90% C.I.
0
68% C.I.
−200
−200
8
12
quarters
Durables Consumption
2
16
0
400
400
4
IRF
0
4
8
quarters
12
16
−2
0
−0
8
12
16
quarters
Nonresidential Fixed Investment 21 / 25
4
−1
−0
0
4
8
quarters
GDP
Expected Federal Fiscal Change
12
16
0
Expected Fiscal Changes: Worked Hours
Fed Spend
S&L Spend
2
0.5
1
Marginal Tax Rate
0.5
0.2
0
0
0
−0.2
−0.5
−1
0
4
8
quarters
GDP
0.5
16
−0.5
0
−0.4
0
12
0
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0
4
8
12
quarters
Consumer Price Index
16
10
16
0
4
8
12
quarters
Durables Consumption
0
16
8
12
quarters
Real Wages
16
0
0
−10
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0
4
8
12
16
quarters
Nonresidential Fixed Investment
2
0
0
06
0
0
4
8
12
quarters
Real Rates
1
16
2
0
−1
0
0
4
8
12
16
quarters
Residential Fixed Investment
0
4
0
8
12
quarters
S&P 500 (%)
8 200
12
0
quarters
−200
Durables
Consumption
4
8
12
16
0
4
8
12
quarters
Real Exchange Rate
quarters
10−Year Treasury Rate
60
40
20
0
−20
−40
8
12
16
quarters
Consumer Sentiment Index
16
−2
200
0
0
4
8
quarters
12
16
16
2
−2
−4
−1
0
16
4
8
12
quarters
Nondurables Consumption
16
0
0.5
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
90% C.I.
200
0
−0
−0.5
68% C.I.
0
0−200
−200
8
12
quarters
Total Worked Hours
0.5
16
400
400
4
−0.5
−0.5
4
4
4
2
0
−2
−2
−0
0
0
0.5
−20 −0.50
−2
0
0
−40
0
0.5
2
16
−20
10 −0.5−1
−20
4
8 −0.5
12
16
4
8
12
16
0
4
8
12
16
quarters
quarters
quartersCivilian Unemployment
Total Worked Hours
Rate
Consumer Price
Index
20
0
−10
0
8
12
quarters
Output Per Hour
0.8
0.6
0.4
0.2
0
−0.2
−0.4
4
0.5
0
8
12
quarters
Output Per Hour
0.5
0
−0.5
4
4
4
8
12IRF
16
0
4
8
12
16
quarters
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment 21 / 25
−0
−0
−0.5
0
Expected Fiscal Changes: Consumption
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
Marginal Tax Rate
0.5
0.2
0
0
−0.5
−0.2
1
0
−1
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
−20
4
8
12
quarters
Durables Consumption
0
4
8
12
quarters
Real Wages
16
4
8
12
quarters
Total Worked Hours
16
−
0
0
4
8
12
16
quarters
Civilian Unemployment Rate
20
0
0
−0.5
−20
4
8
12
quarters
Nondurables Consumption
16
0
0
4
8
12
quarters
Services Consumption
4
8
12
16
quarters
Nonresidential Fixed Investment
0
−2
0
4
8
12
quarters
Real Rates
16
1
4
8
12
16
quarters
Residential Fixed Investment
−1
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
200
0
8
12
quarters
10−Year Treasury Rate
16
0
0
4
8
quarters
12
16
4
8
12
16
quarters
Nonresidential Fixed Investment
2
2
0
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
90% C.I.
0
68% C.I.
IRF
0
4
8
quarters
12
16
−2
200
−200
−200
0
0
4
400
400
−0
−2
−200
0
4
8
12
16
quarters
Consumer Sentiment Index
0
0
0
200
60
40
20
0
−20
−40
0
16
−0.5
0
6
4
2
0
−2
2
8
12
quarters
Durables Consumption
16
0
0
−0.5
0
4
2
−40
0
0.5
−2
−0
−20
0.5
2
−10
−0.5
0
16
0
0
−1
0
16
0
0.5
0.5
0
−10
8
12
quarters
Consumer Price Index
10
−0.4
0
4
16
−
0
4
8
12
quarters
Real Rates
16
21 / 25
−0.2
−0.4
−0.5
0
4
8
12
quarters
Consumer
Expected Federal
Fiscal Change Price Index
16
−0
0
Expected Fiscal Changes: Consumption
Fed Spend
10
2
1
S&L Spend
0
0
4
8
quarters
GDP
12
0.2
0 −0.5
0
−20
0.5
0
0
4
8
12
quarters
Output Per Hour
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0
4
8
12
quarters
Consumer Price Index
16
10
4
16
0
4
16
0
4
8
12
quarters
Durables Consumption
2
16
0
8
12
16
quarters
Nonresidential Fixed Investment
2
0
−2
0
4
8
12
quarters
Real Rates
1
16
2
0
0
−1
0
−2
200
0
06
8
12
16
quarters
Residential Fixed Investment
4
8
quarters
12
16
4
8
12
quarters
Nondurables Consumption
16
16
0.5
0
0
4
4
8
12
quarters
S&P 500 (%)
16
quarters
10−Year Treasury Rate
quarters
Real Exchange Rate
60
40
20
0
−20
−40
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
400
200
90% C.I.
0
68% C.I.
4
0
4
8
quarters
8
12
16
quarters
Real Rates
IRF
12
16
−0
−0.5
8 200
12
16
4
0
2
quarters
0
−200
−2
Nonresidential
Fixed
Investment
0
4
8
12
16
0
4
8
12
16
0
0
8
12
quarters
Services Consumption
0
4
−200
−200
4
−0.5
0
4
8
12
16
quarters
Consumer Sentiment Index
400
0
0
0
0.5
−2
−4
−1
0
−0.5
4
−2
−0.5
−40
8
12
quarters
Nondurables Consumption
0
0
16
0.5
0
−2
8
12
quarters
Real Wages
−20
2 −0.5−1
−20
4
8 −0.5
12
16
0
4
8
12
16
quarters
quartersCivilian Unemployment
Rate
Durables Consumption
20
8
12
quarters
Total Worked Hours
2
0
4
0
0
−10
0
0
0.5
0
16
0.5
0
−0.5
16
0.5
−0.2
−0.4
16
−10
8
12
quarters
Total Worked Hours
Marginal Tax Rate
0.5
0
−1
4
0
4
8
12
16
quarters
Residential Fixed Investment
6
4
2
0
−2
20
−20
0
4
8
12
quarters
10−Year Treasury Rate
16
21 / 25
−0.2
−0.4
8
12
rters
Price Index
16
−0.5
0
4
8
12
quarters
Total
Hours
Expected Federal
FiscalWorked
Change
0
Expected Fiscal Changes: Consumption
Fed Spend
S&L Spend
2
1
0
4
8
quarters
GDP
12
0.5
0.2
0
0
0
16
−0.5
−0.2
−0.5
0.5
−1
0
8
12 −0.5
0
rters
Consumption10
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
4
8
12
quarters
Consumer Price Index
16
8
12
quarters
Output Per Hour
16
0
4
8
12
quarters
Durables Consumption
2
0.5
16
−1
0
0.5
−0.5
4
8
12
16
quarters
Nonresidential Fixed Investment
8
12 2
16
0
rters
−2
Fixed Investment
0
4
8
12
8
12
quarters
Nondurables Consumption
16
0
−1
0
400
200
0
8
12−200
0
rters
Rates
16
4
8
quarters
8
12
quarters
Services Consumption
16
16
0
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
12
quarters
S&P 500 (%)
16
−0.5
8 200
12
16
0
quarters
−200
Residential
Fixed
Investment
0
4
8
12
16
0
4
8
12
16
quarters
10−Year Treasury Rate
quarters
Real Exchange Rate
60
40
20
0
−20
−40
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
90% C.I.
0
68% C.I.
4
8
12
16
quarters
10−Year Treasury Rate
8
quarters
IRF
12
16
0
4
8
12
quarters
Real Exchange Rate
16
−200
200
4
8
12
quarters
S&P 500 (%)
16
400
0
4
0
−2
0
0
200
2
0
16
8
12
quarters
Services Consumption
4
−200
12
4
−0.5
0
6
4
2
0
−2
4
0
−0.5
0
0
0.5
0
0.5
16
6
4
2
4
8
12
16
quarters
0
Consumer Sentiment Index
−2
−40
0
quarters
Real Rates
1
−20
−40
4
0
0
16
−20
0
0
−2
8
12
quarters
Real Wages
0
0
−0.5
−20
4
8 −0.5
12
16
4
8
12
16
0
4
8
12
16
quarters
quarters
quarters Civilian Unemployment
Total Worked Hours
Rate
Nondurables Consumption
20
0
−10
0
0
4
0.5
0
4
0.5
0
8
12
16
quarters
Civilian Unemployment Rate
20
−0.4
0
4
Marginal Tax Rate
0.5
0
−1
16
16
21 / 25
−20
−
Expected Fiscal Changes: Investment
0
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
Marginal Tax Rate
0.5
0.2
0
0
−0.5
−0.2
1
0
−1
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
0
4
8
12
quarters
Total Worked Hours
16
8
12
quarters
Durables Consumption
16
0
4
8
12
16
quarters
Civilian Unemployment Rate
4
8
12
16
quarters
Nonresidential Fixed Investment
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0
0
2
0
0
4
8
12
quarters
Real Rates
16
1
4
8
12
16
quarters
Residential Fixed Investment
−1
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
200
0
8
12
quarters
10−Year Treasury Rate
16
0
0
4
8
quarters
12
16
8
12
quarters
Real Rates
16
1
0
6
4
2
−1
−2
−4
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
200
90% C.I.
0
68% C.I.
−200
−200
4
0
4
400
400
−
0
200
0
4
8
12
16
quarters
Consumer Sentiment Index
0
−200
60
40
20
0
−20
−40
0
−2
−0.5
0
6
4
2
0
−2
−2
8
12
16
quarters
Nonresidential Fixed Investment
2
−40
4
−0.5
0
4
0
−20
0
0
−2
−0
0
0.5
0
0
−2
0.5
2
16
0
20
0
4
16
0
−1
0
8
12
quarters
Real Wages
0.5
−0.5
−20
4
−0.5
0.5
0
−10
0
8
12
quarters
Durables Consumption
2
−0.4
0
4
IRF
0
4
8
quarters
12
16
16
0
4
8
12
16
quarters
Consumer Sentiment Index
21 / 25
−2
0
4
8
12
16
0
4
8
12
16
quarters
Expected FiscalNonresidential
Changes:
10-Year RateResidentialquarters
Fixed Investment
Fixed Investment
Expected Federal Fiscal Change
2
Fed Spend
2
0
1
0
S&L Spend
Marginal Tax Rate
0.5
0.2
0
0
−0.2
−0.5
−1
−0.4
0
4
8
quarters
GDP
12
16
−2
0
4
8
12
quarters
Output Per Hour
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
1
0
−10
−20
0
4
8
12
quarters
Durables Consumption
4
0
4
16
0
16
8 0
12
16
−0.5
quarters
16
0
4
8
12
16
quarters
Real Rates
Civilian Unemployment Rate
20
0
0
−20
−1
−40
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0.5
2
0.5
0
0
0
−1 −0.5
−2
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
−0.5
0
6
4
2
0
−2
2
0
−2
0
4
8
12
quarters
Real Rates
16
200
0
−1
0
4
0
400
1
8
12
quarters
Consumer Sentiment Index
0
16
−200
400
4
8
12
16
quarters
Residential Fixed Investment
4
8
12
quarters
10−Year Treasury Rate
0
4
8
quarters
12
16
8
12
16
16
0
4
8
12
quarters
Real Exchange Rate
16
4
8
12
quarters
CB CEO Confidence Index
16
4
8
12
quarters
10−Year Treasury Rate
16
4
16
60
40
20
0
−20
−40
−
0
8
12
quarters
CB CEO Confidence Index
400
200
0
0
−2
0
4
8
quarters
12
16
−200
400
4
−200
−200
4
2
200
0
−20
0
quarters
8
12
16
S&P 500 (%)
quarters
200
0
Consumer Sentiment
Index
−200
00
200
0
4
60
40
20
0
−20
−40
0
20
8
12
quarters
Total Worked Hours
0.5
0
8
12
quarters
Real Wages
0.5
−0.5
16
4
6
4
2
0
−2
0
4
8
quarters
8
quarters
12
16
90% C.I.
1268% C.I.
IRF
16
0
4
8
quarters
12
16
21 / 25
8
12
16
rters
Fixed Investment
0
4
8
12
16
0
4
8
12
16
8
12
quarters
Real Exchange Rate
16
quarters
quarters
Expected FiscalResidential
Changes:
Real Exchange Rate
Fixed Investment
S&P 500 (%)
Fed Spend
2
1
0
−1
0
4
0.5
8
12 0
−0.5
rters
0
Rates
8
quarters
GDP
12
6
4
2
0
16
−2
Expected Federal Fiscal Change
S&L Spend
0.2
0
0
16
−0.4
0
0
8
12
quarters
Consumer Price Index
16
8
12
quarters
Output Per Hour
16
0
4
8
12
quarters
Real Rates
16
400
200
0
0
−1
0
4
0
4
0
−40
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
2
0
0.5
0
−2
−0.5
4
8
12
16
quarters
Residential Fixed Investment
0
4
4
8
12
quarters
8
12
S&P 500 (%)
quarters
200
0
CB CEO Confidence
Index
−200
4
8
12
quarters
10−Year Treasury Rate
16
0
4
8
12
quarters
Real Exchange Rate
16
16
0
4
8
quarters
12
16
16
90% C.I.
2
68% C.I.
0
−2
0
−200
−200
20
−20
60
40
20
0
−20
−40
8
12
16
quarters
Consumer Sentiment Index
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
IRF
400
400
12
0
16
8 0
12
16
−0.5
quarters
16
0
4
8
12
16
quarters
10−Year Treasury
Civilian Rate
Unemployment Rate
0
−2
8
12
quarters
Real Wages
8
12
quarters
Total Worked Hours
−20
6
4
2
0
−2
4
4
10
60 0.50
40 −0.5−1
0
4
8
12
16
0
20
quarters
Durables Consumption
0
2
0.5
−20 0
0
−40 −0.5
−2
0
4
8
12
16
0
quarters
12 Nonresidential
16
0
Fixed Investment
0
0.5
4
0
8
2
rters
0
entiment Index
8
rters
4
−10
1
0
−0.2
−0.5
0.8
0.6
0.4
0.2
0
−0.2
−0.4
4
200
Marginal Tax Rate
0.5
200
16
200
0
0
4
0
−200
−200
0
4
8
quarters
12
16
0
4
8
quarters
8
quarters
16
90% C.I.
1268% C.I.
16
IRF
12
21 / 25
−
0
4
8
12
quarters
Real Rates
Expected Fiscal Changes: Consumers Confidence
Expected Federal Fiscal Change
Fed Spend
S&L Spend
2
0
−1
1
Marginal Tax Rate
0.5
0.2
0
0
−0.5
−0.2
1
−0.4
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0.5
0
−0.5
0
4
8
12
quarters
Consumer Price Index
16
10
−20
4
8
12
quarters
Durables Consumption
4
8
12
quarters
Total Worked Hours
16
−1
−2
−4
0
0
4
8
12
16
quarters
Civilian Unemployment Rate
20
0
0
−0.5
−20
−40
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
4
8
12
16
quarters
Consumer Sentiment Index
40
400
20
200
0.5
2
0
16
−0.5
0
16
8
12
quarters
Real Wages
6
4
2
0
−1
0
4
0.5
0.5
0
−10
0
16
0.5
0
0
−0.5
−0.5
−2
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
6
4
2
0
−2
2
0
−2
0
4
8
12
quarters
Real Rates
16
1
0
0
8
12
16
quarters
Consumer Sentiment Index
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−20
−200
0
200
0
0
4
0
4
8
quarters
12
16
−200
4
8
12
quarters
10−Year Treasury Rate
16
60
40
20
0
−20
−40
−1
0
0
0
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
400
400
90% C.I.
200
200
68% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
IRF
0
4
8
quarters
12
16
21 / 25
−2
0
4
8
12
quarters
Real
Expected Federal Fiscal
ChangeRates
0
4
Expected Fiscal Changes: CEO Confidence
1
Fed Spend
2
S&L Spend
Marginal Tax Rate
0.5
0.2
0
0
−0.5
−0.2
1
0
0
−1
0
4
8
quarters
GDP
12
−1
0.5
−0.4
16
0
0
0.8
0.6
0.4
0.2
0
−0.2
−0.4
0
4
8
12
quarters
Consumer Price Index
16
10
8
12
quarters
Output Per Hour
16
−20
0
4
8
12
quarters
Durables Consumption
400
16
8
12
quarters
Real Wages
16
0
0
0
0
0
−200
4
8
12
16
quarters
Nonresidential Fixed Investment
2
−2
0
4
8
12
quarters
Real Rates
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0
0
16
200
0
0
0
0
06
4
8
12
16
quarters
Residential Fixed Investment
4
8
12
16
quarters
Consumer Sentiment Index
0
4
8 200
0
quarters
8
12
quarters
S&P 500 (%)
12
16
16
0
4
8
quarters
12
16
−200
0
4
−200
−0.5
−0.5
4
8
12
quarters
10−Year Treasury Rate
16
60
40
20
0
−20
−40
−1
8
12
quarters
CB CEO Confidence Index
0.5
16
1
4
−40
−1
4
2
0
−2
0
0
400
−20
−0.5
0.5
−2
−
0
200
2
4
16
60
40
20
0
−20
−40
8 −0.5
12
16
4
8
12
16
0
4
8
12
16
quarters
quarters
quartersCivilian Unemployment
Total Worked Hours
Rate
Consumer Sentiment
Index
20
0
−10
0
8
12
quarters
10−Year Treasury Rate
4
0.5
0
4
0.5
0
−0.5
16
0
4
8
12
quarters
Real Exchange Rate
16
2
0
−2
0
4
8
12
quarters
CB CEO Confidence Index
16
0
4
8
quarters
12
16
400
400
90% C.I.
200
200
68% C.I.
0
0
−200
−200
0
4
8
quarters
12
16
IRF
0
4
8
quarters
12
16
21 / 25
Misexpected Fiscal Changes
Federal Misexpected Fiscal Change
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
0.05
0
0.5
0
−0.1
−0.05
−0.2
0
0
4
8
quarters
GDP
12
16
0.1
0
4
8
12
quarters
Output Per Hour
16
0.1
−0.1
0
0
0
−0.1
−0.1
−0.1
−0.2
−0.2
−0.2
0
4
8
12
quarters
Consumer Price Index
16
4
8
12
quarters
Real Wages
16
0
4
8
12
quarters
Total Worked Hours
16
0
4
8
12
16
quarters
Civilian Unemployment Rate
10
2
0.1
0
−0.1
−0.2
0
−2
−4
0
0.1
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
5
0
−5
0
4
8
12
quarters
Nondurables Consumption
16
0
−0.1
−0.2
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
−1
4
8
12
quarters
Services Consumption
16
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
50
0
0
−0.5
0
0.05
0
−0.05
−0.1
−0.15
−0.5
0
−1
−50
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.1
0
0
−0.1
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
50
0
0
−50
−50
0
4
8
quarters
12
16
0
0.4
0.2
0
−0.2
−0.4
−0.6
5
0
4
8
quarters
12
16
90% C.I.
68% C.I.
IRF
0
4
8
quarters
12
16
22 / 25
Misexpected Fiscal Changes vs Large SVAR & Ramey
Federal Misexpected Fiscal Change
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
0.05
0
0.5
0
−0.1
−0.05
−0.2
0
0
4
8
quarters
GDP
12
16
0.1
0
4
8
12
quarters
Output Per Hour
16
0.1
−0.1
0
0
−0.1
−0.1
−0.2
0
4
8
12
quarters
Consumer Price Index
16
8
12
quarters
Real Wages
16
Fed Spend
0
0.5
−0.2
0
4
8
12
quarters
Total Worked Hours
16
S&L Spend
0.1
1
0
4
8
12
16
quarters
Civilian Unemployment Rate
−0.1
−0.2
0
10
2
0.1
0
−0.1
−0.2
0
−2
−4
4
0.1
0
−0.1
−0.2
Federal Misexpected Fiscal Chang
0
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment
4
8
12
quarters
Real Rates
16
4
8
12
quarters
10−Year Treasury Rate
16
4
8
12
quarters
S&P 500 (%)
16
0
4
8
12
quarters
Real Exchange Rate
16
0
0
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
50
0
4
8
quarters
12
16
4
8
quarters
12
68% C.I.
−50
0
0
0
−0.1
−0.1
IRF
0
4
8
quarters
12
16
4
8
12
quarters
Output Per Hour
16
0
4
8
12
quarters
Total Worked Hours
16
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
4
8
12
quarters
Consumer Price Index
16
0.1
0
−0.1
−0.2
−2
16
0
0.1
0
−4
90% C.I.
0
−50
0.1
2
0.4
0.2
0
−0.2
−0.4
−0.6
5
0.1
16
0
0
−0.1
12
−0.2
0
−1.5
0
8
quarters
GDP
−50
−1
−1
16
0
−0.5
−0.5
4
8
12
quarters
Services Consumption
50
0
0
0
0.05
0
−0.05
−0.1
−0.15
0
4
8
12
16
quarters
Nonresidential Fixed Investment
4
−5
−0.1
0
0
5
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
−0.1
−0.2
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
22 / 25
Misexpected Fiscal Changes vs Large SVAR & Ramey
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
0.05
0
0.5
0
−0.1
−0.05
−0.2
0
0
4
8
quarters
GDP
12
16
0.1
0
4
8
12
quarters
Output Per Hour
16
0.1
−0.1
0
0
−0.1
−0.1
−0.2
0
4
8
12
quarters
Consumer Price Index
16
8
12
quarters
Real Wages
16
Fed Spend
0
0.5
−0.2
0
4
8
12
quarters
Total Worked Hours
16
S&L Spend
0.1
1
0
4
8
12
16
quarters
Civilian Unemployment Rate
−0.1
−0.2
0
10
2
0.1
0
−0.1
−0.2
0
−2
−4
4
0.1
0
−0.1
−0.2
Large SVAR, Ramey Large EVAR, and Misexpecte
0
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment
4
8
12
quarters
Real Rates
16
4
8
12
quarters
10−Year Treasury Rate
16
4
8
12
quarters
S&P 500 (%)
16
0
4
8
12
quarters
Real Exchange Rate
16
0
0
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
0
−50
−50
0
4
8
quarters
12
16
0
−0.1
−0.1
0
4
8
quarters
12
16
0
4
8
quarters
12
16
4
8
12
quarters
Output Per Hour
16
0
4
8
12
quarters
Total Worked Hours
16
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
−4
0
0.1
0
4
8
12
quarters
Consumer Price Index
16
0.1
0
−0.1
−0.2
−2
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
50
0
0.1
2
0.4
0.2
0
−0.2
−0.4
−0.6
5
0.1
16
0
0
−0.1
12
−0.2
0
−1.5
0
8
quarters
GDP
−50
−1
−1
16
0
−0.5
−0.5
4
8
12
quarters
Services Consumption
50
0
0
0
0.05
0
−0.05
−0.1
−0.15
0
4
8
12
16
quarters
Nonresidential Fixed Investment
4
−5
−0.1
0
0
5
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
−0.1
−0.2
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
22 / 25
Misexpected Fiscal Changes: Gov’t Spending
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
0.05
0
0.5
0
−0.1
−0.05
−0.2
0
0
4
8
quarters
GDP
12
16
0.1
0
4
8
12
quarters
Output Per Hour
16
0.1
−0.1
0
0
0
−0.1
−0.1
−0.1
−0.2
−0.2
−0.2
0
4
8
12
quarters
Consumer Price Index
16
4
0
4
8
12
quarters
Real Wages
16
0
4
8
12
quarters
Total Worked Hours
16
Large SVAR, Ram
8
12
16
quarters
Civilian Unemployment Rate
10
2
0.1
0
−0.1
−0.2
0
−2
−4
0
0.1
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
4
8
12
16
quarters
Nonresidential Fixed Investment
0
8
12
16
quarters
Residential Fixed Investment
−1
4
8
12
quarters
Services Consumption
16
0.5
0
4
8
12
quarters
S&P 500 (%)
16
−0.5
0
−1
−50
−0
−0
0
0
50
0
0
−0.5
0
4
0
1
0.05
0
−0.05
−0.1
−0.15
0
−0.1
0
Fed Spend
5
−5
4
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.1
0
0
−0.1
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
50
0
0
−50
−50
0
4
8
quarters
12
16
0
4
8
12
quarters
Real Exchange Rate
16
0
4
8
quarters
12
16
12
16
0.1
0.4
0.2
0
−0.2
−0.4
−0.6
5
8
quarters
GDP
0
0
0
4
8
quarters
12
16
−0.1
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
−0.2
−0
−0
0
4
8
12
quarters
Consumer Price Index
16
22 / 25
Large SVAR, Ram
Misexpected Fiscal Changes: GDP
Fed Spend
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
0
1
Marginal Tax Rate
0.1
1
0.05
0
0.5
0
−0.1
0
4
8
quarters
GDP
12
16
0.1
0
4
8
12
quarters
Output Per Hour
16
0.1
−0.1
0
0
0
−0.1
−0.1
−0.2
0
4
8
12
quarters
Consumer Price Index
16
4
8
12
quarters
Real Wages
4
8
12
quarters
Total Worked Hours
16
−0
0
0
−0.2
0
−0
16
0
4
4
8
12
16
quarters
Civilian Unemployment Rate
10
2
0.1
0
−0.1
−0.2
0
−2
−4
0
0.1
−0.1
−0.2
0.5
−0.05
−0.2
0
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
5
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment
16
0
0
−0.1
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−0
−0.2
−0
0
−50
−1
−1
8
12
quarters
Services Consumption
0
−0.5
−0.5
4
50
0
0
0
0.05
0
−0.05
−0.1
−0.15
−0.1
8
12
16
quarters
Nonresidential Fixed Investment
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.1
0
0
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
0
−50
−50
0
4
8
quarters
12
16
0
4
8
quarters
12
16
4
8
12
quarters
Consumer Price Index
16
2
0
0
0
4
8
quarters
12
−0
−0
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
50
0
0
0.4
0.2
0
−0.2
−0.4
−0.6
5
−0.1
16
0.1
0
0
4
12
−5
0
0
8
quarters
GDP
−2
−4
0
4
8
12
quarters
Durables Consumption
16
22 / 25
0
4
Misexpected Fiscal Changes: CPI Inflation
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
−0.05
−0.2
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
−0.1
0.1
0.1
0
0
0
−0.1
−0.1
−0.1
−0.2
−0.2
−0.2
0
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Real Wages
16
0
4
8
12
quarters
Total Worked Hours
16
−0.1
−0
−0.2
0.1
−0
0
0
4
8
12
16
quarters
Civilian Unemployment Rate
10
2
0.1
0
−0.1
−0.2
0
−2
−4
0
0
0
−0.1
0
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
−0.5
−1
0
4
8
12
quarters
Services Consumption
16
0
4
8
12
16
quarters
Residential Fixed Investment
0
50
0
−1
−50
0
−0
−0
−2
0
−0.5
2
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−4
0
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0
0
−0.1
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
0
−50
−50
0
4
8
quarters
12
16
0
4
8
quarters
12
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
50
0
0
0.4
0.2
0
−0.2
−0.4
−0.6
5
0.1
16
0
0.05
0
−0.05
−0.1
−0.15
0
8
12
16
quarters
Nonresidential Fixed Investment
8
12
quarters
Consumer Price Index
0
0
4
4
5
−5
−0.1
0
16
0.05
0
0.5
12
0.1
Marginal Tax Rate
0.1
1
8
quarters
GDP
0
4
8
quarters
12
16
0.4
0.2
0
−0.2
−0.4
−0.6
4
8
12
quarters
Durables Consumption
16
−0
0
−0
8
12
16
quarters
Nonresidential Fixed Investment 22 / 25
4
0
4
8
12
16
0
4
Misexpected Fiscal
Changes:
Worked
Hours
quarters
8
12
quarters
Output Per Hour
GDP
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
0.1
Fed Spend
S&L Spend
0.1
0.5
0 −0.1
0
0
−0.2
−0.05
0
4
8
quarters
GDP
12
16
−0.1
−0.2
0
−0.1
0
4
8
12
quarters
Consumer Price Index
0
4
8
12
quarters
Durables Consumption
0.4
0.2
0
−0.2
−0.4
−0.6
2
16
8
12
quarters
Output Per Hour
16
0
16
0
−2
4
0
0.1
0
−0.1
−0.2
4
8
12
quarters
Nondurables Consumption
16
0.1
0
−0.1
−0.2
0
50
0
4
8
12
quarters
Real Rates
0
00
16
0.4
0.2
0
−0.2
4
8
12
16
quarters
−0.4
Consumer Sentiment Index
−0.6
4
8
12
16
quarters
Residential Fixed Investment
0
4
8
quarters
12
16
4
8
12
quarters
S&P 500 (%)
12
quarters
Real Exchange Rate
quarters
10−Year Treasury Rate
16
4
8
12
quarters
Total Worked Hours
16
16
0
−10
0
4
8
12
quarters
CB CEO Confidence Index
50
4
16
0.1
0
−0.1
−0.2
16
−
0
16
4
8
12
quarters
Nondurables Consumption
16
0.0
0.4
0.2
0
−0.2
−0.4
−0.6
−5
0
0
0
8 50
12
0
quarters
−50
Durables
Consumption
4
8
12
16
0
4
8
5
−50
4
8
12
quarters
Services Consumption
4
0
−50
−0
0
1
0
0.05
0
−0.05
−0.1
−0.15
−1.5
0
−0
−0.2
0
0
−1
−1
−0.1
5
−0.5
−0.5
16
−5
−0.2
0
8
12
quarters
Real Wages
8 −0.2
12
16
4
8
12
16
0
4
8
12
16
quarters
quarters
quartersCivilian Unemployment
Total Worked Hours
Rate
10
Consumer Price
Index
0
−4
4
−0.1
4
0
4
8
12
16
quarters
Nonresidential Fixed Investment
0
0
−2 −0.1
0
−0.1
0
0.1
−0.1
2
−4
0
0.1
0−0.2
−0.2
0
0.05
0
0.1
−0
0.1
Marginal Tax Rate
1
16
0
0
4
8
quarters
12
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
8
12
16
0
4
8
12
16
quarters
quarters
Nonresidential Fixed Investment
−0.0
−0
−0.1
−0.1
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment 22 / 25
−0.2
−0
0
4
8
12
quarters
Consumer Price Index
Misexpected Fiscal Changes: Consumption
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
2
0.05
0
0.5
0
4
8
quarters
GDP
12
16
0
0.1
0
0
−0.1
8
12
quarters
Output Per Hour
16
4
8
12
quarters
Consumer Price Index
16
−0.1
0
4
8
12
quarters
Real Wages
−0
−0
16
−2
0.1
0
−4
−0.1
−0.2
0
−0.2
0
4
8
12
quarters
Total Worked Hours
16
0
0
4
8
12
16
quarters
Civilian Unemployment Rate
10
2
0.1
0
−0.1
−0.2
0
−2
−4
4
−0.1
−0.2
0
−0.05
−0.2
0.1
0
0
−0.1
0
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
8
12
16
quarters
Nonresidential Fixed Investment
0
4
8
12
16
quarters
Residential Fixed Investment
16
0
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
4
8
12
quarters
Real Exchange Rate
16
−0
0
0.1
0
0
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
0
−50
−50
0
4
8
quarters
12
16
0
4
8
quarters
12
16
4
8
12
16
quarters
Nonresidential Fixed Investment
0
0
4
8
quarters
12
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
50
0
0
0.4
0.2
0
−0.2
−0.4
−0.6
5
−0.1
16
−0
−1.5
0
8
12
quarters
Durables Consumption
0.4
0.2
0
−0.2
−0.4
−0.6
−50
−1
−1
8
12
quarters
Services Consumption
0
−0.5
−0.5
4
50
0
0
0
0.05
0
−0.05
−0.1
−0.15
0
4
4
5
−5
−0.1
0
16
−0
−0.5
−
−1
−1
0
4
8
12
quarters
Real Rates
16
22 / 25
−0.2
−0.2
0
4
8
12
quarters
Price
Index
Large SVAR, Ramey Large Consumer
EVAR, and Misexpected
Fiscal Changes
16
−0
0
4
8
12
quarters
Total Worked Hours
Misexpected Fiscal Changes: Consumption
Fed Spend
S&L Spend
2
1
0.5
4
8
quarters
GDP
12
16
−2
0.1
0
0
−0.05
0
4
8
12
quarters
Output Per Hour
16
0.1
0
−0.2
0
4
8
12
quarters
Consumer Price Index
16
2
0
0
0.4
0.2
0
−0.2
−0.4
−0.6
0
0
−0.5
−1
0
4
8
12
quarters
Real Rates
16
0
8
12
quarters
Nondurables Consumption
16
−0.5
50
−1
0
−50
4
8
quarters
12
16
4
8
12
quarters
Services Consumption
16
0.05
0
−0.05
−0.1
−0.15
4
8
12
16
quarters
Residential Fixed Investment
16
0
0
4
8
12
quarters
S&P 500 (%)
16
−0.2
0
−10
4
8
12
quarters
CB CEO Confidence Index
0
4
0
4
8
quarters
16
8
12
16
quarters
Residential Fixed Investment
5
−0.5
0
4
8
quarters
8
12
16
quarters
Real Rates
12
4
0
12
16
−5
−1
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
50
0
quarters
Real Exchange Rate
0.4
0.2
0
−0.2
−0.4
−0.6
0
−0.0
−0
−0.1
−0.1
4
0−50
0
8
12
quarters
Nondurables Consumption
0.0
0
8 50
12
16
0
−0.5
quarters
−50
−1
Nonresidential
Fixed
Investment
−1.5
0
4
8
12
16
0
4
8
12
16
4
8
12
16
quarters
Consumer Sentiment Index
4
0
4
−5
−0.2
−
0
−5
quarters
10−Year Treasury Rate
0
0
−0.1
16
8 −0.2
12
16
4
8
12
16
0
4
8
12
16
quarters
quarters
quartersCivilian Unemployment
Total Worked Hours
Rate
10
Durables Consumption
5
0.1
8
12
quarters
Real Wages
5
00
0
4
0
0.4
0.2
4
8
12
16
0
quarters
0
Durables Consumption
−0.2 0
−0.4 −0.1
−0.2
−0.6
4
8
12
16
0
quarters
Nonresidential Fixed Investment
0
0.1
0
−0.1
−0.2
−0.1
4
0.1
0
−0.1
−0.2
−2
−0.1
0.1
−4 −0.1
0−0.2
−0.1
−4
0.05
0
0 −0.2
0
1
Marginal Tax Rate
0.1
−0.1
0
16
16
−1.5
0
4
8
12
quarters
10−Year Treasury Rate
16
22 / 25
−0.2
8
12
rters
Price Index
16
−0.2
0
4
Misexpected Fiscal Changes: Consumption
8
12
quarters
Total
Worked
Large SVAR, Ramey Large EVAR,
and Misexpected
Fiscal Hours
Changes
4
Fed Spend
1
0.5
0
0
4
8
quarters
GDP
0.1
0
S&L Spend
0.1
0
12
16
−0.1
−0.2
−0.1
8
12 −0.2
0
rters
Consumption2
−4
0
4
8
12
quarters
Durables Consumption
0.4
0.2
0
−0.2
−0.4
−0.6
−0.2
4
8
12
16
quarters
Nonresidential Fixed Investment
12
16
−0.5
50
8
quarters
8 −0.2
12
16
16
0
4
8
12
16
quarters
quarters Civilian Unemployment
Rate
10
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
5
0
4
8
12
quarters
Nondurables Consumption
16
0
4
8
12
quarters
Services Consumption
16
0.05
0
−0.05
−0.1
−0.15
0
−0.2
0
0
4
8
12
16
quarters
Residential Fixed Investment
0
4
4
8
12
quarters
S&P 500 (%)
16
0.05
0
−0.05
−0.1
−0.15
8 50
12
16
0
0
−0.5
quarters
−50
−1
−1.5 Residential Fixed Investment
0
4
8
12
16
0
4
8
12
16
0
−5
−10
0
4
8
12
quarters
CB CEO Confidence Index
4
0
16
8
quarters
12
8
12
quarters
S&P 500 (%)
16
0
4
8
12
quarters
Real Exchange Rate
16
0
0
4
8
quarters
8
12
16
quarters
10−Year Treasury Rate
4
4
50
12
16
−50
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
0
0
quarters
Real Exchange Rate
0.4
0.2
0
−0.2
−0.4
−0.6
5
0
12
0
−5
−5
−50
16
16
8
12
quarters
Total Worked Hours
50
4
8
12
quarters
Real Wages
4
−0.1
−1.5
0
4
−0.1
4
−1
0
0
0
0
4
8
12
16
quarters
Consumer Sentiment Index
−50
−0.1
quarters
10−Year Treasury Rate
0
0
16
0.1
0
0
0.1
−0.2
8
12
quarters
Output Per Hour
0
quarters
Real Rates
−0.1
4
0.1
0
5
−0.05
0
16
−0.1
0
0
0.1
0
−0.1
−0.2
0
10
0.05
−0.2
16
−2
8
12
16
quarters
Civilian Unemployment Rate
0
0−0.2
8
12
quarters
Consumer Price Index
16
Marginal Tax Rate
0.1
−0.1
−0.1
16
4
8
12
16
0
rters
−0.5
−1
Fixed Investment
0
4
8
8
12
rters
Rates
0
16
22 / 25
−0
−4
0
Misexpected Fiscal Changes: Investment
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
0.05
0
0.5
0
−0.1
−0.05
−0.2
0
0
4
8
quarters
GDP
12
16
0
4
8
12
quarters
Output Per Hour
16
−0.1
0.1
0.1
0
0
0
−0.1
−0.1
−0.1
−0.2
−0.2
−0.2
0
4
8
12
quarters
Consumer Price Index
16
4
8
12
quarters
Real Wages
16
0
4
8
12
quarters
Total Worked Hours
16
0.1
0
−0.1
−0.2
0
−2
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
−0
4
8
12
16
quarters
Civilian Unemployment Rate
0
4
8
12
quarters
Nondurables Consumption
16
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment
−1
4
8
12
quarters
Services Consumption
16
0
0
−0.5
0
−1
−50
−0
−0.5
4
8
12
quarters
S&P 500 (%)
16
4
8
12
quarters
Real Exchange Rate
16
−
−1
−1
0
50
0
0
0
0.05
0
−0.05
−0.1
−0.15
0
−0.5
8
12
16
quarters
Nonresidential Fixed Investment
5
0
4
8
12
16
quarters
Nonresidential Fixed Investment
4
−5
−0.1
0
4
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.1
0
0
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
50
0
0
−50
−50
0
4
8
quarters
12
16
0
0.4
0.2
0
−0.2
−0.4
−0.6
5
−0.1
16
−0
0
0
8
12
quarters
Durables Consumption
0.4
0.2
0
−0.2
−0.4
−0.6
10
2
−4
0
0.1
4
0
4
8
quarters
12
16
8
12
quarters
Real Rates
16
0.1
0
0
4
8
quarters
12
16
−0.1
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
−0.2
−
−1
0
4
8
12
16
quarters
Consumer Sentiment Index
22 / 25
−0.6
−0.1
−0.2
0
4
8
12
16
quarters
Nonresidential
Fixed
Investment
Large SVAR, Ramey
Large EVAR, and Misexpected
Fiscal Changes
0
4
8
12
16
quarters
Residential Fixed Investment
Misexpected Fiscal Changes: 10-Year Rate
Fed Spend
S&L Spend
Marginal Tax Rate
1
0.1
0.5
0 −0.10
0
0
−0.2
−0.05
0
4
8
quarters
GDP
12
16
−0.5
0.1
0
4
8
12
quarters
Output Per Hour
16
0.1
−1
0
−0.1
4
8
12
quarters
Consumer Price Index
16
2
0
−2
0
4
8
12
quarters
Durables Consumption
0.4
0.2
0
−0.2
−0.4
−0.6
0.1
16
4
0
4
0.1
0
−0.1
−0.2
−0.1
0
0
00
4
8
12
quarters
Nondurables Consumption
16
−1
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
16
quarters
Residential Fixed Investment
0
−5
4
8
12
16
quarters
Consumer Sentiment Index
0
−50
50
0
−50
4
8
12
quarters
CB CEO Confidence Index
0
0
4
8
quarters
12
16
16
4
0
4
8
quarters
12
0
0
0
−0
−0
−0
−5
0
4
8
12
quarters
S&P 500 (%)
16
−10
0
4
8
12
quarters
CB CEO Confidence Index
16
16
50
0
0
50
0
−50
8
12
quarters
10−Year Treasury Rate
quarters
Real Exchange Rate
−10
0
4
16
0.4
0.2
0
−0.2
−0.4
−0.6
0
0
−0.2
8
12
quarters
Services Consumption
8 50
12
16
0
quarters
−50
Consumer
Sentiment
Index
4
8
12
16
0
4
8
12
16
5
−0.1
4
0.05
0
−0.05
−0.1
−0.15
quarters
10−Year Treasury Rate
50
0.1
0
5
0
4
−0.5
−1
−5
−1
−1.5
5
−0.2 −0.20
−0.5
16
8 −0.2
12
16
16
0
4
8
12
16
quarters
quartersCivilian Unemployment
Rate
10
Real Rates
0
0
8
12
quarters
Real Wages
−5
0
4
8
12
16
quarters
Nonresidential Fixed Investment
4
8
12
quarters
Total Worked Hours
−0.1 −0.1
0
−0.5
0
0
−0.1
0
−0.1
5
0
0.1
0
0−0.2
−0.2
−4
0.05
8
16
quarters
4
8
quarters
12
16
−50
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
12
16
0
4
8
quarters
12
16
22 / 25
−0.15
−0.2
8
12
16
rters
Fixed Investment
0
4
8
Misexpected Fiscal Changes: Real Exchange
Rate
quarters
8
12
16
quarters
Fixed
Large SVAR, RameyResidential
Large EVAR, and Misexpected
FiscalInvestment
Changes
4
Fed Spend
S&L Spend
1
0
0.5
0
4
8
quarters
GDP
12
0
8
12
quarters
Output Per Hour
16
0
0
−0.1
16
5
4
8
12
quarters
Durables Consumption
0.4
0.2
0
−0.2
−0.4
−0.6
4
0
0.1
0
−0.1
−0.2
16
4
8
12
quarters
Nondurables Consumption
16
0
0
−1
−1.5
16
0
quarters
Real Rates
0
0
−0.1
0
−5
0.1
−0.2
0
4
8
12
16
quarters
Residential Fixed Investment
0
−50
50
0
0
4
8
12
quarters
CB CEO Confidence Index
16
0
0
0−50
16
0
4
8
quarters
12
16
4
8
12
quarters
S&P 500 (%)
16
quarters
Real Exchange Rate
50
12 −50
16
0.4
0.2
0
−0.2
−0.4
−0.6
−10
4
8
12
16
quarters
Consumer Sentiment Index
8
12
quarters
Services Consumption
8 50
12
16
0
quarters
−50
CB
CEO
Confidence
Index
4
8
12
16
0
4
8
12
16
quarters
10−Year Treasury Rate
50
5
4
4
−0.5
12
0
0.05
0
−0.05
−0.1
−0.15
−0.1
0
−50
0
0
−10
16
16
5
−0.2
4
8
12
16
quarters
Nonresidential Fixed Investment
8
12
quarters
Real Wages
8 −0.2
12
16
4
8
12
16
0
4
8
12
16
quarters
quarters
quarters Civilian Unemployment
Total Worked Hours
Rate
10
10−Year Treasury
Rate
0
0
4
−5
0
−5
8
12
quarters
Real Exchange Rate
0
0
0.1
0−0.2
4
8
12
quarters
Consumer Price Index
8
12
16
0
rters
−0.5
−1
entiment Index
0
4
8
−0.1
0.1
0
0
4
−0.1
16
S&P 500 (%)
0
−0.05
0
−1.5
−2
−4
0
−1
0.1
−0.1
16
50
0.05
−0.2
16
12
Marginal Tax Rate
0.1
−0.1
−0.5
0
8
12 −0.2
0
rters
Rates
2
8
rters
0
4
0
4
8
quarters
8
16
quarters
4
8
quarters
12
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
12
0
4
0.4
0.2
0
−0.2
−0.4
−0.6
0
4
8
quarters
12
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
16
12
22 / 25
−1
−1
0
4
8
12
Misexpected Fiscal Changes: Consumers
Confidence
quarters
Real Rates
Large SVAR, Ramey Large EVAR, and Misexpected Fiscal Changes
Fed Spend
S&L Spend
Marginal Tax Rate
0.1
1
0.1
0.05
0
0.5
4
8
quarters
GDP
12
16
0
0.1
0.1
0
0
−0.1
4
8
12
quarters
Output Per Hour
16
4
8
12
quarters
Consumer Price Index
16
0
4
8
12
quarters
Real Wages
16
−0.1
−0.1
4
8
12
quarters
Total Worked Hours
16
−1
0
−0.2
0
−
−0.2
0
−0.2
0
−0.1
0.1
−0.1
−0.2
0
−0.05
−0.2
0
0
4
8
12
16
quarters
Civilian Unemployment Rate
10
2
0.1
0
−0.1
−0.2
0
−2
−4
0
−0.1
0
0
4
8
12
quarters
Durables Consumption
16
0.4
0.2
0
−0.2
−0.4
−0.6
8
12
quarters
Nondurables Consumption
16
0
4
8
12
16
quarters
Residential Fixed Investment
4
8
12
quarters
Services Consumption
5
16
0
−50
0
4
8
12
quarters
S&P 500 (%)
16
−0.5
0
−1
−50
4
8
12
quarters
Real Exchange Rate
16
−5
0
50
0
−1
0
0.05
0
−0.05
−0.1
−0.15
−0.2
0
50
0
4
0
−0.5
8
12
16
quarters
Consumer Sentiment Index
5
0
4
8
12
16
quarters
Nonresidential Fixed Investment
4
−5
−0.1
0
16
4
8
quarters
12
16
−1.5
0
4
8
12
quarters
Real Rates
16
0
4
8
12
quarters
10−Year Treasury Rate
16
0.1
0
0
−0.1
−5
−0.2
−10
0
4
8
12
16
quarters
Consumer Sentiment Index
50
0
4
8
12
quarters
CB CEO Confidence Index
16
0
0
−50
0
4
8
quarters
12
16
0
4
8
quarters
12
16
90% C.I.
68% C.I.
Misexpected Fiscal Change
Large SVAR Fiscal Shock
‘‘Ramey’ Large EVAR Shock
50
−50
0
0.4
0.2
0
−0.2
−0.4
−0.6
5
0
4
8
quarters
12
16
22 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
What are the Nowcast Errors?
I
Slow absorption of information
I
Data revisions
I
Model mispecifications/Higher order terms
I
Forecasters’ aggregate bias
I
Accounting issues
I
Deviations from rational expectations
I
Optimism or pessimism? [Enders et al (2013)]
I
...
I
...
I
“Misexpected” structural shocks
23 / 25
Fiscal Cumulated Multipliers
Government Spending Cumulative Multipliers
1
6
1
5
0
0
−1
−1
−2
−2
4
Large SVAR
1 std
Large EVAR
1 std
−3
−4
0
4
8
12
16
Large SVAR & EVAR
3
2
1
−3
−4
Cum. Mult.
1 std
0
4
8
12
16
Misexpected Fiscal Change
0
−1
Cum. Mult.
1 std
0
4
8
12
16
Unexpected Fiscal Change
I
Cumulative output multiplier for Expected Fiscal Changes
around 1.5
I
Multipliers adjusted to take into account the direct effect of
Fed spending only S&L Adjusted Multipliers
24 / 25
Conclusions
I
Identification in the presence of foresight and imperfect
information
I
Novel empirical measures fiscal information flow at
different horizons
I
Fiscal spending have large effect
I
Investment accelerator
I
Other applications: monetary policy, forward guidance
25 / 25
Appendix
Expected, Unexpected & Misexpected Events
Ekman, Frisen - “Unmasking the Face”
Back...
If you have time to anticipate an event and do so correctly, then
you cannot be surprised. [...] Surprise is triggered both by
unexpected and misexpected events. [...]
An unexpected surprise is triggered by an unexpected event, that
is an event that happens at the moment the surprised person was
not expecting anything in particular to happen.
A misexpected surprise is triggered by an event that happens in
contrast to some specific anticipation for something different to
happen at that moment.
I
Expected, Unexpected & Misexpected Events
Ekman, Frisen - “Unmasking the Face”
Back...
If you have time to anticipate an event and do so correctly, then
you cannot be surprised. [...] Surprise is triggered both by
unexpected and misexpected events. [...]
An unexpected surprise is triggered by an unexpected event, that
is an event that happens at the moment the surprised person was
not expecting anything in particular to happen.
A misexpected surprise is triggered by an event that happens in
contrast to some specific anticipation for something different to
happen at that moment.
I
Expected, Unexpected & Misexpected Events
Ekman, Frisen - “Unmasking the Face”
Back...
If you have time to anticipate an event and do so correctly, then
you cannot be surprised. [...] Surprise is triggered both by
unexpected and misexpected events. [...]
An unexpected surprise is triggered by an unexpected event, that
is an event that happens at the moment the surprised person was
not expecting anything in particular to happen.
A misexpected surprise is triggered by an event that happens in
contrast to some specific anticipation for something different to
happen at that moment.
I
The Identification of Fiscal Spending Shocks
I
The Identification of Fiscal Spending Shocks (I)
The “classic” identification of fiscal shocks
Blanchard, Perotti (2002):
b
∆gt − P[∆g
t |Yt−1 , Yt−2 , . . . ] = ε̂t ∝ fiscal shockt
Assumptions:
I
“Little information” on future government spending
I
Discretionary policy does not respond to output within a
quarter
Surprises informative of discretionary measures effects
Back...
II
The Identification of Fiscal Spending Shocks (II)
The fiscal foresight issue [Leeper et al. (2013)]
Ramey (2011): (professional) forecast errors as proxy for fiscal
shocks
∆gt − E∗t−1 ∆gt = ε̂t ∝ fiscal shockt
|
{z
}
forecast error
Assumptions:
I
Rational Expectations
I
Full Information
I
Discretionary policy does not respond to output within a
quarter
Surprises informative of discretionary measures effects
Back...
III
The Identification of Fiscal Spending Shocks (III)
The “classic” identification strikes back
Decomposition of the one-step-ahead forecast error into
∆gt − E∗t−1 ∆gt = (∆gt − E∗t ∆gt ) + (E∗t ∆gt − E∗t−1 ∆gt )
|
{z
}
|
|
{z
}
{z
}
forecast error
surprise
revision of expectations (noise)
Perotti (2012): Government spending forecasts convey little
information on future government spending, and so does their
revision.
Back...
IV
The Identification of Fiscal Spending Shocks (III)
Imperfect information & fiscal foresight
Decomposition of the two-step-ahead forecast error into
∆gt − E∗t−2 ∆gt = (∆gt − E∗t ∆gt ) + (E∗t ∆gt − E∗t−1 ∆gt ) +
{z
}
|
|
{z
} |
{z
}
forecast error
nowcast error
revision of expectations (news)
+ (E∗t−1 ∆gt − E∗t−2 ∆gt )
|
{z
}
revision of expectations (news)
I
Information frictions modify the agents’ decision problem
I
... and the econometric identification problem
I
Forecast revisions are informative: “news”
I
Nowcast errors: “misexpectations”
Back...
IV
The Survey of Professional Forecasters
IV
Survey of Professional Forecasters Data
Number of Respondents
60
ASA/NBER SPF
Philadelphia Fed SPF
SPF Tighter Timing
# Respondents
50
40
30
20
10
0
Number of Resp. in Two Consecutive Quarters
Total Respondents
1985
1990
1995
2000
2005
2010
Back...
V
0
Debt−ceiling Crisis
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
% Growth Rate
Debt−ceiling Crisis
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
Hurr. Katrina
Gulf War II − JTRRA
Balanced Budget (II)
Berlin Wall Fall
Fed Shutdown
Kosovo War
War Afghanistan
EGTRRA
9/11
Gulf War
Gulf War II − JTRRA
War Afghanistan
EGTRRA
Kosovo War
Berlin Wall Fall
Balanced Budget (II)
2010
2005
2000
1995
1990
1985
−10
Tax Reform
Balanced
Budget
ERTA
−5
9/11
Gulf War
G.W.Bush (II) B.Obama (I)
G.W.Bush (I)
B.Clinton (II)
B.Clinton (I)
2010
2005
2000
1995
1990
1985
−4
Tax Reform
Balanced
Budget
−2
R. Reagan (II) H.W.Bush
Ramey Military Spend News
Median from individual data
5
Fed Shutdown
SPF News & Ramey military spending news
SPF Implied News
% Growth Rate
ERTA
0
Median from individual data
SPF News Skwness
2
Individual Median News One Year Ahead and Ramey Military News
Back...
VI
Other Macro Shocks
Nowcast Errors (median)
News Q0 (median)
News Q1-Q3 (median)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
0.77
0.33
-0.02
0.00
0.01
-0.01
0.06
-0.01
0.02
-0.10
0.15
-0.02
-0.09
0.03
0.07
-0.04
-0.08
0.00
0.11
0.02
0.07
-0.04
-0.06
0.06
-0.07
-0.19
-0.16
Correlations of News and Nowcast Errors with Other Proxy Variables: (1)
Ramey (2011) Federal Spending SPF Forecast Errors, (2) Ramey (2011)
Present Discounted Value of Military Spending - PDVMIL, (3) Romer & Romer
(2010) Endogenous Tax Changes, (4) Romer& Romer Exogenous Tax Changes,
(5) Romer & Romer (2004) Monetary Policy Shocks, (6) Baker et al (2013)
Uncertainty Index, (7) Baker et al (2013) Uncertainty Index - Monetary Policy,
(8) Baker et al (2013) Uncertainty Index - Taxes, (9) Baker et al (2013)
Uncertainty Index - Government Spending Back...
VII
SPF Implied News and Nowcast Errors
Spectra
Nowcast Errors and News Spectral Density
−3
1.5
1.5
Spectral Density
Spectral Density
2
−3
x 10 Fed Goverment Spend Growth
1
0.5
0
32Q
0
−4
6
x 10
2
Frequency
Nowcast Errors
1
0.5
6Q
1
x 10
0
3
SPF Implied News Q0/Q−1
32Q
0
−4
3
6Q
1
x 10
2
Frequency
3
Implied News Q3/Q0
Spectral Density
Spectral Density
5
4
3
2
2
1
1
0
32Q
0
6Q
1
2
Frequency
3
0
32Q
0
6Q
1
2
Frequency
3
Back...
VIII
SPF Implied News
Informational content
Independent Variable
F-stat
Prob > F
reg. coeff.
t-stat
n[
ews (0)
n[
ews (0) (aggr. data)
n[
ews (1, 3)
n[
ews (1, 3) (aggr. data)
7.54
3.50
6.76
3.57
0.007
0.064
0.011
0.062
0.620
0.448
0.783
0.457
2.75
1.87
2.60
1.89
Individual vs Aggregated...
IX
Heterogenous Beliefs and Aggregation Bias
IX
Heterogenous Beliefs and Aggregation Bias
SPF news from individual and aggregated data
Fiscal News
Median News One Year Ahead from Individual and Aggregated Data
R. Reagan (II) H.W.Bush
B.Clinton (I)
B.Clinton (II)
2
2010
Debt−ceiling Crisis
2005
Health Care Act
Stimulus 2009
Stimulus 2008
Iraq Troop Surge
2000
Hurr. Katrina
9/11
1995
Gulf War II − JTRRA
Gulf War
1990
G.W.Bush (I) G.W.Bush (II) B.Obama (I)
Median from aggregated data
Median from individual data
SPF News Skwness
War Afghanistan
EGTRRA
Kosovo War
Fed Shutdown
1985
Berlin Wall Fall
−4
Balanced Budget (II)
−2
Tax
Reform
Balanced
Budget
0
ERTA
% Growth Rate
4
Individual Median News One Year Ahead and Ramey Military News
Back...
B.Clinton (I)
B.Clinton (II)
G.W.Bush (I)
G.W.Bush (II) B.Obama (I)
0
Debt−ceili
Health Ca
Stimulus 2
Stimulus 2
Iraq Troop
Hurr. Katr
Gulf War
War Afgha
EGTRRA
Kosovo W
Fed Shutd
Berlin Wa
Balanced
−5
Tax Refor
Balanced
ERTA
% Growth Rate
5
R. Reagan (II) H.W.Bush
Ramey Military Spend News
Median from individual data
X
Heterogenous Beliefs and Aggregation Bias
SPF news from individual and aggregated data
Aggregated and Individual SPF Data Median News
0
2
1.5
Simulated Data
Linear Fit Sim Data
95% band
1
0.5
0
−0.5
−1
−1.5
2
Distance Aggr.−Ind. Median News
SPF Data
Linear Fit Data
95% band
Distance Aggr.−Ind. Median News
SPF News Distribution Skwness
5
1.5
1
0.5
0
−0.5
−1
−1.5
−5
−2
−1
0
1
2
Median SPF News Size
MC Simulations
Military News
−4
−2
0
2
SPF News Distribution Skwness
−2
−1
0
1
2
Median SPF News Size
Back...
XI
Heterogenous Beliefs and Aggregation Bias
Correlation Ind.–Aggr. Data Median News
Mean Abs Dist. Ind.–Aggr. Data Median News
Corr. of Av. Dist. Ind.–Aggr. News w/ Dist. Mean
Corr. of Av. Dist. Ind.–Aggr. News w/ Dist. Std
Corr. of Av. Dist. Ind.–Aggr. News w/ Dist. Skew.
Corr. of Av. Dist. Ind.–Aggr. News w/ Dist. Kurt.
(1)
(2)
(3)
(4)
SPF data
1.000
0.00
-0.04
0.02
0.04
0.04
1.00
0.01
0.09
-0.12
-0.07
0.04
0.87
0.21
0.52
0.14
0.77
0.01
0.86
0.20
0.51
0.15
0.77
0.01
0.82
0.36
0.37
0.31
0.41
0.13
Statistics of SPF and MC Simulated Forecast Data on Future Quarters.
Statistics on the median news from individual and aggregated SPF data and
from SPF Monte Carlo simulated data (nsim = 10, 000). (1) Monte Carlo
simulated data with news sampled from a Pearson distribution with skewness
equal to zero and the time-varying kurtosis implied by SPF data. (2) Monte
Carlo simulated data from an unbalanced panel in which 6 out of the 29
simulated forecasters are dropped from one period to the following. The news
is sampled from a Pearson distribution with skewness equal to zero and the
time-varying kurtosis implied by SPF data. (3) Monte Carlo simulated data
with news sampled from a Pearson distribution with the time-varying skewness
and kurtosis implied by SPF data. (4) Adds an unbalanced panel composition
as specified for column (2) to the specification in column (3) Back...
XII
Full Information vs Imperfect Information
XII
Full Information Rational Expectations
I
Back...
Agents have a complete information set It−h
E[gt |It−h ] + ut + ut−1 + · · · + ut−h+1 = ∆gt
I
−→ Align the econometric information set to the agents’ one
Agents’ forecast errors are combinations of structural shocks
gt − E[gt |It−1 ] = ut
I
−→ Agents’ forecast errors are proxy for structural shocks
Agents have perfect knowledge of the state of the world
gt − E[gt |It ] = 0
I
−→ No additional information in nowcast errors
Agents have the same information set
−→ No aggregation issue
XIII
Full Information Rational Expectations
I
Back...
Agents have a complete information set It−h
E[gt |It−h ] + ut + ut−1 + · · · + ut−h+1 = ∆gt
I
−→ Align the econometric information set to the agents’ one
Agents’ forecast errors are combinations of structural shocks
gt − E[gt |It−1 ] = ut
I
−→ Agents’ forecast errors are proxy for structural shocks
Agents have perfect knowledge of the state of the world
gt − E[gt |It ] = 0
I
−→ No additional information in nowcast errors
Agents have the same information set
−→ No aggregation issue
XIII
Full Information Rational Expectations
I
Back...
Agents have a complete information set It−h
E[gt |It−h ] + ut + ut−1 + · · · + ut−h+1 = ∆gt
I
−→ Align the econometric information set to the agents’ one
Agents’ forecast errors are combinations of structural shocks
gt − E[gt |It−1 ] = ut
I
−→ Agents’ forecast errors are proxy for structural shocks
Agents have perfect knowledge of the state of the world
gt − E[gt |It ] = 0
I
−→ No additional information in nowcast errors
Agents have the same information set
−→ No aggregation issue
XIII
Full Information Rational Expectations
I
Back...
Agents have a complete information set It−h
E[gt |It−h ] + ut + ut−1 + · · · + ut−h+1 = ∆gt
I
−→ Align the econometric information set to the agents’ one
Agents’ forecast errors are combinations of structural shocks
gt − E[gt |It−1 ] = ut
I
−→ Agents’ forecast errors are proxy for structural shocks
Agents have perfect knowledge of the state of the world
gt − E[gt |It ] = 0
I
−→ No additional information in nowcast errors
Agents have the same information set
−→ No aggregation issue
XIII
Imperfect Information Rational Expectations
Two classes of models:
I
Delayed-information models – agents update their
information set infrequently but arrive at perfect information
once they do [Mankiw and Reis (2002) and Reis (2006a,b)]
I
Noisy-information models – agents continuously update
their information but observe only noisy signals about the true
state [Woodford (2001), Sims (2003) and Mackowiak and
Wiederholt (2009)]
incorporate deviations from full information
Back...
XIV
Identification with Imperfect Information
I
The new information is only partially absorbed over time
gt − E∗t−h gt =
I
I
1−κ ∗
Et−h gt − E∗t−h−1 gt + ut−h+1,t
κ
−→ Forecast errors combine current and past shocks
Expectations revisions may be correlated
E∗t gt − E∗t−1 gt = (1 − κ) E∗t−1 gt − E∗t−2 gt + κut
−→ but are good proxies for shocks (conditional on their past)
Nowcast errors (“misexpectations”)
gt − E∗t gt =
I
Back...
1−κ ∗
Et gt − E∗t−1 gt
κ
−→ May contain additional information
Agents have heterogenous beliefs
−→ Potential aggregation bias
XV
Identification with Imperfect Information
I
The new information is only partially absorbed over time
gt − E∗t−h gt =
I
I
1−κ ∗
Et−h gt − E∗t−h−1 gt + ut−h+1,t
κ
−→ Forecast errors combine current and past shocks
Expectations revisions may be correlated
E∗t gt − E∗t−1 gt = (1 − κ) E∗t−1 gt − E∗t−2 gt + κut
−→ but are good proxies for shocks (conditional on their past)
Nowcast errors (“misexpectations”)
gt − E∗t gt =
I
Back...
1−κ ∗
Et gt − E∗t−1 gt
κ
−→ May contain additional information
Agents have heterogenous beliefs
−→ Potential aggregation bias
XV
Identification with Imperfect Information
I
The new information is only partially absorbed over time
gt − E∗t−h gt =
I
I
1−κ ∗
Et−h gt − E∗t−h−1 gt + ut−h+1,t
κ
−→ Forecast errors combine current and past shocks
Expectations revisions may be correlated
E∗t gt − E∗t−1 gt = (1 − κ) E∗t−1 gt − E∗t−2 gt + κut
−→ but are good proxies for shocks (conditional on their past)
Nowcast errors (“misexpectations”)
gt − E∗t gt =
I
Back...
1−κ ∗
Et gt − E∗t−1 gt
κ
−→ May contain additional information
Agents have heterogenous beliefs
−→ Potential aggregation bias
XV
Identification with Imperfect Information
I
The new information is only partially absorbed over time
gt − E∗t−h gt =
I
I
1−κ ∗
Et−h gt − E∗t−h−1 gt + ut−h+1,t
κ
−→ Forecast errors combine current and past shocks
Expectations revisions may be correlated
E∗t gt − E∗t−1 gt = (1 − κ) E∗t−1 gt − E∗t−2 gt + κut
−→ but are good proxies for shocks (conditional on their past)
Nowcast errors (“misexpectations”)
gt − E∗t gt =
I
Back...
1−κ ∗
Et gt − E∗t−1 gt
κ
−→ May contain additional information
Agents have heterogenous beliefs
−→ Potential aggregation bias
XV
Multipliers
XV
Fiscal (S&L Adjusted) Multipliers
Fiscal Multipliers (impact/peak)
GDP
D Cons
ND Cons
S Cons
NRes Inv
Res Inv
Definition
Unexpected
1.28
(0.63)
0.54
(0.2)
0.28
(0.12)
0.21
(0.18)
0.34
(0.19)
-0.15 (0.15)
Misexpected
0.98 (0.29)
0.17 (0.13)
0.07 (0.08)
0.04 (0.09)
0.12 (0.14)
0.08 (0.07)
Expected
3.06
(1.24)
0.21
(0.31)
0.19
(0.21)
-0.28 (1.44)
0.89
(0.49)
0.90
(1.12)
Back...
XVI
Adjusted Fiscal Multipliers
The impulse response function of a variable, e.g, output, to the
news shock Nt can be expressed as follow
#
"
Fed
S&L d log G Fed
Gt+h
d log Yt+h
∂Yt+h ∂Gt+h
∂Yt+h
t+h
=
+
Fed
Fed
S&L
dNt
Yt+h ∂Gt+h
dNt
∂Gt+h ∂Gt+h
Rearranging (and approximating)
peak
M
≡
1+
Ȳ
IRFpeak (Y )
Ḡ Fed
Ḡ S&L
IRFpeak (G S&L )
Ḡ Fed
Back...
XVII